Liverpool raises council tax 19.5%: Budget cut as city loses out in government grant allocation

THE HEAVIEST burden of local taxation was set reluctantly yesterday by Liverpool City Council, recognised by the European Union as Britain's poorest region.

The Labour-controlled authority increased council tax for 1994-95 by 19.5 per cent, and reduced its budget for services by pounds 17m to pounds 440m. The Liberal Democrat opposition abstained on the budget vote, lending guarded support to Labour's claim that yardsticks used by Whitehall to allocate grants to local authorities produce 'grotesque' results despite changes this year.

Three out of four Liverpool households, occupiers of homes in the band valued at up to pounds 40,000, will receive demands next month for pounds 577.81 - an increase of pounds 94.34.

In the median Band D (pounds 68,000-pounds 88,000), council tax will increase to pounds 866.72 from pounds 725.20. Liverpool is resigned to beginning the new financial year as the authority with the highest council tax in England and Wales. By contrast, Band D taxes in other big cities will be cut.

Dawn Booth, chairwoman of Liverpool's finance committee, said local services would have been cut by up to pounds 40m if council taxes had not been increased. 'Our grant settlement from central government was worse than for any other authority,' Ms Booth said. 'The SSA (Standard Spending Assessment used by Whitehall) has produced inexplicable and grotesque results.'

The complexities of council spending, a corollary of greater control from London of local government, mean cities like Liverpool have lost out in the revision of SSA for 1994-95, whereas some smaller authorities, such as Barnsley in South Yorkshire, have benefited. Ms Booth said Liverpool had 'made savings year on year, got rid of entrenched views and managed to improve services. We have been given Objective One Status for regional aid by Europe, recognition that we are in greater need than anywhere else in the country, but our government operates a system that cannot be fair. For example, they estimate that it costs pounds 807 a year to care for a child at risk in Liverpool, but pounds 8,500 in Brent.'

Liverpool believes it can find savings worth pounds 17m through council house rent increases, debt deferment, and a revised allocation of new building projects to be carried out by the authority's works department. There will be no rise in school-meal prices, or charges for home helps.

Liberal Democrats said shortfalls in the 1994-95 budget had been caused in part by Labour's mismanagement. But the SSA system has continued to draw all-party criticism in the 36 metropolitan councils covering major English conurbations outside London.

Barnsley has gained most from a major revision of the SSA introduced for 1994-95 by David Curry, the local government minister. It fared worst under the old system. The new SSA yardsticks include for the first time measures of unemployment and long-term debilitating illness.

Phil Coppard, Barnsley's assistant chief executive, said: 'We are a poor area, but with a stable social structure. We do not have a large ethnic minority population or many single-parent families - factors which were important benchmarks in the old system. But we have the highest level of long-term limiting illness in the country because of the coal industry, and high, increasing unemployment . . .'

Council tax for most Barnsley households will be reduced by pounds 35.23 to pounds 362.06. It would have liked to spend more, rather than cut taxes. New SSA measures could have produced an extra pounds 3m, but government 'capping' of total town hall spending will prevent any significant budget increase. Risks of capping have produced the paradox in other councils 'benefiting' from the revised criteria for grants of service cuts - including job losses - and lower tax levels.

Mr Coppard said: 'All the factors used in the SSA are relative, and the formula seems to have a life of its own. Places like Liverpool have had three good years, we've had three bad. The problem is that we are still locked in a system that relies hugely on past levels of spending. That needs to be replaced by a real estimate of how much to spend, and nobody sitting in London can be expected to know what a standard level of service should be in Barnsley or Liverpool.'

----------------------------------------------------------------- Band D council tax ----------------------------------------------------------------- City 1993 1994 Liverpool pounds 725 pounds 866 Newcastle pounds 791 pounds 771 Birmingham pounds 657 pounds 632 Sheffield pounds 639 pounds 602 Leeds pounds 599 pounds 599 -----------------------------------------------------------------