Local authorities planning big council tax rises told to hold referendums

First Published by: The Guardian 

• Rule applies to councils planning rises of more than 3.5% 
• Eric Pickles says move is radical extension of direct democracy 
• £675m set aside to fund second year of council tax freezes 

The community’s secretary, Eric Pickles, has announced that any local authority planning to increase Council Tax by 3.5% or more will be required to hold a referendum asking local people to endorse the move.

Pickles described the move as a radical extension of direct democracy, but it is also likely to deter many councils from risking the judgment of their council-tax-payers.

The government says it has set aside £675m for a second year of council tax freezes. The Department for Communities and Local Government said if councils agree to the freeze, local taxpayers living in an average band D home in England could save up to £72 a year in council tax.

The power to trigger referendums was contained in the Localism Act and in some ways replaces the power to impose caps. Parliament will be asked to endorse the final vote threshold before councils set their annual budgets in the spring. Pickles said: "Since 1997 people have seen their council tax more than double, pushing typical bills to £120 a month.

"We are getting to grips with this with another council tax freeze deal and by radically extending direct democracy over big bill increases with a new local tax-lock. "Councils have a moral obligation to help hard-working families and pensioners with the cost of living.

"If they want to hike taxes on their local residents above 3.5% they'll now need to get a direct democratic mandate to do it."

The government also set out its provisional second-year funding settlement for English local authorities as announced a year ago. Councils will have an average spending power of £2,186 per household at their disposal.

£27.8bn will be distributed in 2012-13 in a fair and sustainable way across all parts of the country, the department said.

For example, the average spending power per household in Hackney will be £3,050, compared with £1,537 in Windsor and Maidenhead, reflecting the fairness of the settlement, it said.

Overall, the average spending power reduction for councils in 2012-13 is expected to be limited to just 3.3%, or £75 per household, less than last year's comparable figure of 4.5%.

"The second year of our fair and sustainable settlement will mean councils still have on average £2,186 for every household they serve, enough to safeguard the most vulnerable, protect taxpayers' interests and the frontline services they rely on," Pickles said.

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