Council tax to rise above inflation

Average council tax will rise by an above-inflation 5 per cent next year, the Government said, despite a warning that ministers would not hesitate to cap excessive increases.

Phil Woolas, the Local Government minister, said yesterday that local authorities would have a 4.9 per cent rise in grants next year, hailing the £65.7bn settlement as "stable, predictable and adequate".

But the Government faced anger from council leaders, who said vital services such as waste collection and social services would face a cash squeeze.

The Conservatives claimed that a 5 per cent annual increase would take average council tax bills to £1,500 a year by the time Labour leaves power.

Announcing the annual local government settlement, Mr Woolas said the rise would mean government grants had risen by 39 per cent in real terms since 1997. He told MPs: "We have provided a stable and predictable funding basis for local services. We expect local government to respond positively so far as council tax is concerned.

"We expect to see an average council tax increase in England in 2007-08 of less than 5 per cent. We will not allow excessive council tax increases."

Eric Pickles, shadow local government minister, said that council tax had "gone through the roof". Council leaders said most of the extra money for local government had been earmarked for schools.