Council tax to increase by double the rate of inflation

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Indy Politics

Council tax bills are set to rise by twice the rate of inflation in April, fuelling criticism that the Government is using town halls to collect a "stealth tax".

The annual financial settlement for local authorities, due to be announced on Monday, will pave the way for the tax to rise by about 5 per cent next spring even though consumer price inflation is running at 2.3 per cent. Such an increase would take the average bill for a Band D home in England from £1,214 to £1,274.

Council leaders accused ministers of trying to "bury bad news" by releasing their cash deal on Monday when it would be overshadowed by Gordon Brown's pre-Budget report.

John Prescott, the Deputy Prime Minister, is also expected to announce he is scrapping a rule which allows up to 1.4 million council staff on to retire on full pensions at 60.

He will provide a transitional period to 2013 to protect existing staff aged 52 or older but is likely to face a backlash from trade unions. It could deny local government workers the early retirement at 60 for teachers, health workers and civil servants that was preserved under a deal negotiated by Alan Johnson, the Trade and Industry Secretary.

Ministers and Labour MPs are worried about the impact of a sharp rise in town hall bills at next May's local elections. Vincent Cable, the Liberal Democrats' Treasury spokesman, said: "Gordon Brown has a serious potential problem here. Council tax rises will be capped but the Local Government Association believes there is a £2bn gap. Unless that is filled somehow it will be fairly drastic."

Mr Brown will preview themes of his pre-Budget report today, setting out how Britain can make the most of the opportunities of globalisation.

His plans include spending an extra £50m over the next two years to make the UK a world leader in stem cell research; a new national institute for health research in the NHS; and a new partnership with the pharmaceutical industry likely to boost its research budget by 30 per cent or £1bn in the long term. Mr Brown will say: "Each of us - companies, governments, and individuals - are having to respond to the scale, speed and scope of a transformed global economy. Like you I want a Britain that is a leader in the world's fastest-growing, most wealth-creating sectors at the cutting edge of global advance - in capital markets and financial services; in science and innovation; in creativity and enterprise; in skills and education."