Soaring Council Tax bills to be capped

Published on Sunday 1 January 2006 00:51

MINISTERS are planning to cap council tax increases for the first time since devolution if Scottish town halls press ahead with inflation-busting charges this year.

In a move which threatens to spark a bitter dispute between the Scottish Executive and local government, any council attempting to impose a double-digit rise will be ordered to think again.

Ministers fear an electoral backlash if - as has been suggested - some local authorities hike bills by up to 16% this April, increasing the annual charge for a typical Band F property by 200 to around 1,700.

Councils claim big increases are needed because they have been starved of the central funding needed to pay for services such as schools, roads and social work.

But Executive insiders, privately seething at what they claim is inefficiency in many areas of local government, say they have handed out more than enough money and any increases should be limited to less than 2.5%.

Ministers are actively examining the "nuclear option" of capping council tax increases - a measure which has not been threatened since 1999.

Until now, finance minister Tom McCabe has publicly attempted to play down the looming row.

But a senior Executive source told Scotland on Sunday: "If they [council taxes] did come in at the levels that they are talking about, then ministers would have to look at capping."

The insider added: "This is something the Executive has to seriously start thinking about now. Ministers have this power, and when you're talking about rises of 16%, then that isn't acceptable."

Councils jealously guard their power to set charges and will be infuriated by the Executive's move, which marks a major escalation in the smouldering row between them over funding levels.

Last week, CoSLA (the Confederation of Scottish Local Authorities) warned that its members were facing a 400m black hole in their finances for this year.

They claim that extra services imposed on them by the Executive - such as free personal care for the elderly and free bus travel - have sent budgets into the red.

Ministers say local authorities should be able to cope, pointing to the 50% increase in the central government grant since devolution, and the near doubling of council tax rates since 1996.

Dumfries and Galloway has already calculated it will need to raise tax by 16% this year if it does not get extra financial help. Several other councils are also warning of the possible need for double-digit hikes.

Even if drastic rises are avoided, it is likely this year's council tax rates will be almost double what they were a decade ago. The average Band D bill is likely to hit 1,124 this year, up from 624 in 1996.

The row over council tax rates in Scotland could now become as bitter as the one which has raged south of the Border for the past three years and led to some pensioners being jailed after refusing to pay.

The Treasury has attempted to defuse the row by giving English councils an extra 1.8bn to fund reductions in council tax for pensioners. But it has also warned that if councils still put up taxes by more than 5% next year, they will face capping.

CoSLA claims that Scottish ministers have so far failed to give the same kind of extra help that councils in England have received from the Treasury. Their funding deal from the Executive - which makes up 80% of all their income - is due to rise by only 3.5% next year and 2.4% the year after, well below what they say they need.

Opposition parties yesterday blamed the Executive for the crisis, pointing to a report last month by the Scottish Parliament's all-party Finance Committee which found that ministers were under-funding councils by some 139m a year.

John Swinney, finance spokesman for the SNP, said: "Instead of engaging in this type of foghorn diplomacy and double bluff, Tom McCabe would be better served addressing the serious concerns that are held by local authorities."

David Davidson, local government spokesman for the Scottish Tories said: "I think if you are going to do capping, it would force councils into efficiency savings but equally such a move could easily come back to bite the Executive, because the councils could turn round and refuse to fulfil many of the pledges that the Executive wants them to do."

The row is now set to rumble on until later this month when McCabe is due to meet council chiefs.

A spokesman for McCabe said:

"All of this is hypothetical at the moment. We believe that we have given councils enough funding to keep council tax rises to a low level whilst providing the services to people which they expect and deserve."

But he confirmed that capping was on the cards.

Scandal of 71m in expenses as taxpayers face hike

COUNCILS are spending millions of pounds extra on expenses such as members' allowances, hospitality and foreign trips while planning big hikes for local taxpayers, new figures obtained by this newspaper reveal.

Scotland's 32 councils will this year rack up 71m in "corporate management" costs - up from 64m last year - while insisting they are struggling to pay for frontline services.

The cash represents an 11.6% year-on-year increase and is well above the 5% extra in spending on schools, or the 3.7% increase on roads and transport.

The figures are compiled by the Chartered Institute for Public Finance and Accountancy (CIPFA), the most authoritative independent assessor of local authority spending.

The sum is made up of corporate costs such as the generous allowances given to councillors depending on their rank and position, which can reach as high as 30,000 for individual councillors.

Also included are councillors' out-of-pocket expenses, postage, equipment costs, hospitality, accommodation, training and conference fees, along with costs for chief executives' offices. In all but four councils - Glasgow, Aberdeen, East Dunbartonshire and Fife - councillors have increased the sums they spend.

In some cases, councils have doubled their spending. In Aberdeenshire, the budget is set to rise from 2,090,000 in 2005 to 5,247,000 this year. In North Lanarkshire, spending will increase from 2,045,000 to 3,057,000.

According to the CIPFA figures, the 8% increase in corporate management costs outstrips all other areas of expenditure apart from the fire service and planning. Overall spending on services by councils will rise this year by 5.7%, according to the figures, to 10.2bn.

Fresh scrutiny over local authority spending has been triggered by the claims by CoSLA (Confederation of Scottish Local Authorities) last week that the councils are facing a 1bn shortfall in spending.

Councils are blaming the Scottish Executive for not handing them enough money, and in some cases are threatening double-digit council tax rises which they say are necessary to meet the shortfall.

However, ministers point to the 50% increases in grant funding which have been given to councils since devolution. They are also pointing the finger privately at the slackness of the expenses system in Scotland's town halls.

There have been several cases in recent years where councillors have been found to have abused their generous allowances and expenses allocation. In one case in Glasgow last month, a councillor was forced to resign after it emerged he had been claiming cash for lunches which he had eaten for free at the City Chambers buffet laid on for elected members.

A government source added: "There have also been cases of people claiming for simply sitting in their council chamber. These things just aren't appropriate."

Meanwhile, there have also been numerous examples where councillors have used the allowances system to enjoy trips abroad.

Glasgow Lord Provost Liz Cameron had her costs met to attend the "Scottish Week" event in the Dominican Republic in the Caribbean in 2003.

Not to be outdone, Edinburgh Lord Provost Lesley Hinds charged the taxpayer 862 in expenses for the cost of a week-long trip to the Rugby World Cup in Sydney.

Ministers are now to order a complete overhaul of the entire system. A review of allowances, being led by Ian Livingstone, former chair of Lanarkshire Health Board, will report back within the next six weeks, and is expected to recommend that the murky way in which council expenses are handled is radically changed.

Councillors are expected to receive higher up-front salaries, with the system of allowances being curtailed.

Opposition parties warned last night that councils needed to prove they were spending money efficiently if they were to prove their case for extra funding. David Davidson, local government spokesman for the Scottish Conservatives, said: "It is incumbent on councillors to make sure that no money is wasted."

A spokesman for the Scottish Executive said: "The Scottish Remuneration Committee will be reporting very shortly with the findings and obviously the system of allowances and expenses will be changed, as it presently is very opaque and outdated."