Osborne finds £805m to freeze council tax

  • @NigelpMorris

George Osborne will attempt to appease voters hit by spiralling food and energy prices by promising a second year's freeze on council tax today.

The move – to be announced in his speech to the Conservative Party conference – will save the average family £72 a year, the Chancellor will claim.

But the £805m "giveaway" was condemned by union leaders who said it would do nothing to create jobs or encourage economic growth.

The move comes as a poll of Conservative MPs for The Independent reveals a growing pessimism among backbenchers about the Coalition Government's ability to achieve sustained growth over the next 12 months.

Only half of the party's MPs expected growth to improve next year, the ComRes survey found, while one in six (16 per cent) predicted it would decline and 32 per cent that it would stay at its current feeble level.

Conservative MPs are also gloomy about jobs; 44 per cent of the MPs expect that unemployment will rise over the next 12 months, while only 29 per cent believe it will fall and 28 per cent said it would stay at current levels.

The party gathered yesterday in Manchester amid mounting gloom over the state of the economy and fears that Britain could slide into a double-dip recession. Mr Osborne has already signalled that tax cuts are unlikely before the next general election in 2015 and admitted that his timetable for cutting the deficit may be delayed. Ministers will warn activists about the tough times ahead, but will also try to lift spirits with a series of crowd-pleasing announcements.

In a move designed to appeal to the party faithful, Iain Duncan Smith, the Work and Pensions Secretary, will also promise moves to cut tax for married couples by the next general election and warn the unemployed of tough new penalties if they fail to look for work.

The money for the tax freeze for 2012-13 had been found from under-spending across Whitehall departments, a Treasury source claimed.

Under the plans, local authorities that promise to peg – or even cut – council tax levels will receive a 2.5 per cent increase in Whitehall funding. Council tax was also frozen last year.

Mr Osborne will argue in his speech that the sovereign debt crisis in Europe makes it more, not less, important stick to the Government's deficit-reduction plan – explicitly ruling out any "Plan B".

But he will hint at new proposals, likely to come in November, to boost growth in the economy.

These will be led by Lord Young, who was Margaret Thatcher's Employment and Trade and Industry Secretary, who has been called in by Downing Street to lead a cross-departmental drive to make Whitehall more "business friendly" and cut regulation.

Mr Osborne will tell the conference that the Government recognises it needs to do more to promote growth and, as evidence that ministers are listening to business, will point to controversial changes in employment law that would extend workers' probationary period from one year to two.

But last night Brendan Barber, the general secretary of the TUC, said that while the council tax freeze might help families cope with rising bills, the announcement would do nothing to deal with the country's underlying economic problems.

"This is not the best way to boost jobs and growth," he said. "This is politics, not economics."

More announcements on the growth strategy have been held back from Mr Osborne's speech, as Tory strategists are keen that they should not be seen as party political. They want to ensure that the Liberal Democrats are seen to have "bought into them" as any further curtailment of workers' rights is likely to be strongly opposed by Labour.

Mr Duncan Smith will tell the conference today that he is committed to providing extra help for the family.

"This isn't about government interfering in family life; it's about government recognising that stable two-parent families are vital for the creation of a strong society – it's about parents taking responsibility for their children."