On 13 December, I indicated that when the House debated the final local government finance report I would set out council tax capping principles that will apply to local authorities’ budgets for 2011-12. I am therefore now informing the House that I will consider an authority to have set an excessive increase if:
(a) the amount calculated by the authority as its budget requirement for 2011-12 is more than 92.5 per cent of -
(i) the authority’s alternative notional amount; or
(ii) where no such amount has been specified for the authority, the authority’s budget requirement for 2010-111; and
(b) the amount calculated by the authority as its band D council tax for 2011-12 is more than 3.5 per cent greater than the same amount calculated for 2010-11 (except see below).
Different principles will apply to the Greater London Authority (GLA), and to the councils of Central Bedfordshire and Shropshire. The reasons for this are -
- in the case of the GLA, because the authority calculates its council tax in a different way from other authorities2, and
- in the case of Central Bedfordshire and Shropshire, because the authorities set their basic amounts of council tax for 2010-11 under part 4 of the Local Government (Structural Changes) (Finance) Regulations 20083 and may do so again for 2011-12.
My officials will write to these three authorities separately with further technical details about how the principles applicable to them will operate. However, I can confirm that the policy aim of the capping principles for 2011-12 is the same for all authorities and that the principles for the GLA, Central Bedfordshire and Shropshire are designed to ensure that appropriate comparisons can be made between the band D council tax set by those authorities in 2010-11 and 2011-12.
I am this year announcing these principles before the dates by which authorities have to set their budgets. This contrasts with the approach of the previous Government, which always required authorities to wait and see whether the council tax they had set would be considered excessive by reference to principles not decided until after the deadlines for setting their budgets had passed.
Moving forward, the Government intend to end the capping regime and replace it with a more democratic and localist measure to allow local residents to veto excessive council tax rises via a local referendum.
1 Alternative notional amounts apply to all classes of authority except for fire and rescue authorities.
2 Unlike other authorities, the GLA calculates two basic amounts of council tax; one under section 88(2) of the Greater London Authority Act 1999 and one under section 89(3) of that Act.
3 SI 2008/3022. Central Bedfordshire and Shropshire were established on 1 April 2009. In order to equalise council tax more fairly in their areas, part 4 of SI 2008/3022 enables the authorities to calculate different basic amounts of council tax for their predecessor areas for up to five financial years. By contrast all other authorities (except the GLA) must calculate only one basic amount of council tax.