'GRANNY FLATS' TO GET TAX BREAKS UNDER NEW PROPOSALS

First Published by: The Guardian 

ERIC PICKLES ANNOUNCES PLANS TO SCRAP COUNCIL TAX BILLS FOR LIVE-IN ANNEXES AND MAKE IT EASIER TO CONVERT GARAGES

Eric Pickles says the plans should benefit many families and pensioners. Hundreds of thousands of families could benefit from tax breaks on "granny flats" under plans being considered by the government. The communities secretary, Eric Pickles, said he was keen to scrap Council Tax for live-in annexes, arguing the current rules were "fundamentally unfair". It is believed ministers are also considering overhauling planning regulations and fees to make it easier for home-owners to convert garages and other outbuildings. 


Pickles told the Daily Telegraph: "We are keen to remove tax and other regulatory obstacles to families having a live-in annexe for immediate relations. "We should support homeowners who want to improve their properties and standard of living. These reforms should also play a role in increasing the housing supply."

The MP said it was unfair for households to be charged twice by paying Council Tax on their homes and annexes - which are regarded as separate dwellings. It is estimated that as many as 300,000 households in England could benefit from the change. The reforms are expected to form part of a package of policies to increase housing supply and address the shortage of affordable homes over the next two years.

Labour said it was unclear who would benefit from any further relaxation of the tax rules as annexes occupied by dependants aged over 65 are already exempt. Government sources conceded that the timing or detail of any change, which would probably require primary legislation, had not yet been considered. Such a move would also reduce the income of local councils at a time when town halls are already being forced to implement severe spending cuts.

The shadow communities secretary, Hilary Benn, said: "This is a decidedly peculiar claim by Eric Pickles as occupied granny flats have been exempt from Council Tax since 1997. "It is therefore extremely unclear exactly which pensioners the government expects to benefit from these changes, and the granny-tax fiasco doesn't give us confidence that they will get this right.

"This seems to be nothing more than an attempt to deflect attention from their housing crisis. What we need is to get building and get the economy moving again. That's why Labour is proposing to build 25,000 new affordable homes and a temporary cut to the rate of VAT. " Under the 1997 regulations, Council Tax is not paid on annexes occupied by relatives who are over 65, "mentally impaired", or "substantially and permanently disabled".

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.


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COUNCIL TAX REBATE REFORMS RISK REPEAT OF POLL TAX DISASTER, SAYS IFS

First Published By: The Guardian 

REPORT SAYS REFORMS WILL HIT LOWEST INCOME HOUSEHOLDS HARDEST AND RISK 'SEVERELY UNDERMINING' UNIVERSAL CREDIT SCHEME

The 1990 poll tax riots in London: the IFS says 'the perceived unfairness of the poll tax was associated with non-compliance on a scale rarely seen in the UK'. Plans to give local authorities control over Council Tax rebate at the same time as cutting funding by a tenth could result in the poor driven out by boroughs seeking to save money – and raises the prospect of a replay of the poll tax debacle, a report claims.

A damning assessment by the Institute for Fiscal Studies of the proposed Council Tax benefit changes, which start next April, says that although the reform's £480m a-year savings equate to an average £19 per household, the working poor would be hit hardest. The government proposes to allow councils to design a local benefit system but in return says it will cut funding for it by 10%. With 5.9 million recipients, it is more widely claimed than any other means-tested benefit or tax credit.

The cut in funding will be larger, says the think-tank, in areas where Council Tax benefit spending is highest – the more deprived areas of Britain. It estimates the cut in funding will range from around £5 per dwelling in the wealthy City of London to £38 per household in Haringey, the fourth most deprived borough in the capital. The report also notes that the requirement to protect pensioners in England means that the cut in funding of a tenth translates into a 19% cut in support for working-age claimants. Those local authorities where pensioners account for an above-average share of Council Tax benefit spending would need to make larger percentage cuts to support for working-age recipients. For one in 10 English local authorities it would be more than 25%, with the highest value being 33% in East Dorset and in Craven, North Yorkshire.

The IFS also says cuts to Council Tax support are bound to hit lower-income households, as 85% of the benefit goes to the lower-income half of households and almost half goes just to the lowest-income fifth. The report's authors warns that to limit their spending councils will have "an incentive to discourage low-income families from living in the area" and that raises the possibility that councils will – like the ill-fated poll tax of the early 1990s – be left to chase desperately poor people through the courts for small amounts of unpaid tax. The poll tax led to riots and played a part in the downfall of Margaret Thatcher. Recalling these events, the IFS says in 1990 "the perceived unfairness of the tax was associated with non-compliance on a scale rarely seen in the UK".

However, the new scheme replicates some of the worst aspects of the poll tax. "These policies mean that all households, even those on the lowest incomes, would have to pay some Council Tax. The poll tax experience showed how difficult it can be to collect small amounts of tax from low-income households that are not used to paying it," they say, noting that the poll tax was "quickly replaced". The proposed scheme also risks "severely undermining" the government's flagship universal credit scheme, which will replace six of the seven main means-tested benefits and tax credits for those of working age with a single benefit. However, the seventh means-tested benefit will be "localised".

James Browne, a senior research economist at the IFS and one of the authors of the report, said: "Cutting support for Council Tax and localising it are two distinct policy choices: either could have been done without the other. Whether you think that cutting Council Tax support for low-income families is the best way to reduce government borrowing by £500m will depend on your views about how much redistribution the state ought to do.

"But the advantages of localisation seem to be outweighed by the disadvantages, particularly as it has the potential to undermine many of the positive impacts of universal credit." The local government minister, Bob Neill, said: "Labour fostered a culture of welfare dependency with Council Tax benefit more than doubling on their watch. "People who have worked hard all their lives and paid taxes need to know the spiralling benefits bill is being controlled and that work pays. "It is right that local authorities, who collect Council Tax, have a strong incentive to put in place a fairer local Council Tax support scheme that helps their residents get back into employment based on local priorities.

"I find it astonishing that the IFS are following the Labour party's lead and recommending the abolition of the single person's discount. "We shouldn't be punishing single mums and pensioners who have worked hard all their lives and paid their taxes simply because they live on their own. There is a gross sense of injustice at raising taxes that could force people out of their homes."

Labour said that the universal credit programme risked descending into chaos. Stephen Timms, the shadow work and pensions minister, said: "We've been warning for the last 18 months that universal credit was so badly thought through that chaos would ensue. Now, the IFS has revealed that the new benefit will be torpedoed by changes to Council Tax benefit. One part of government doesn't seem to know what the other part is doing.

"It looks like two parts of government are simply at war with each other; and it's poor old ratepayers who could pick up the tab, with higher bills or worse services. Thousands could find themselves suddenly better off on benefits than in work. "With the work programme sinking, the benefits bill spiralling up by £9bn and huge questions over universal credit, the government's welfare reforms are looking more chaotic by the minute."

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.


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FAMILY FINANCES ARE SQUEEZED – WHAT CAN YOU DO TO EASE THE PAIN?

First published by: The Guardian

Look at how to bridge the income gap

With everything from the cost of driving, food and bills rising families are struggling. Spring will bring a chill for most of us - a combination of at least 45 tax and benefit changes will ransack household budgets already depleted by soaring food and fuel prices, and predicted interest rate rises will tip many mortgage holders into the red.

On average, households are already £480 a year worse off following tax changes introduced in January, according to the Institute for Fiscal Studies. April's reforms, including increases to fuel duty and national insurance contributions, will add an extra £200 burden. 

The problem of making ends meet is particularly acute for families. Last year households with dependent children needed an additional £650 a month just to cover everyday living costs compared to those without, according to the Consumer Credit Counselling Service (CCCS).

Families with more than three children are, on average, £45 short of the money they need to live each month. No wonder, then, that 28% of Britons are spending more than they earn each month, according to Cooperative Insurance and homeless charity Shelter. Joanna Parsley, associate director of charity Credit Action, said: "Even people who have had a marginal increase in their salaries will find it is cancelled out by rising living costs. Those with no children or on lower incomes might be better off because of an increase in the personal allowance, but for most of us there really is no way to avoid the squeeze. It is vital that everyone looks to revisit their finances and get them in order."

Homeowners are likely to be more precarious than renters, the CCCS said. On average, clients who own their own home have more than £30,000 in unsecured debts on top of their mortgages. And although interest rates on credit cards and personal loans don't usually move in line with bank base rate, a 2% rise would lead to a £307 increase in monthly mortgage payments. "It is the lull before the storm," said CCCS spokeswoman Una Farrell last week. "Mortgage holders have managed quite well because interest rates have been so low, but we are expecting a big influx of new clients as rates rise."

No section of society is safe. CCCS chairman Lord Stevenson said: "It seems likely that many more families, including better-off ones, will be increasingly prone to over-indebtedness in the months ahead. "It is also not a uniform picture: public sector cuts in terms of jobs, spending and benefits will weigh disproportionately on certain groups, and the incidence of unmanageable debt bears down harder on specific parts of the country, such as London and Yorkshire."

It is easy to blame inflation and tax rises, but are we also to blame for expecting too high a standard of living? Apparently not, if research by First Direct is anything to go by. It found that young people would have to increase their income by 55% to enjoy the lifestyle their parents had at the same age. The figures show that someone in their mid-twenties would have to earn £39,720 to buy a house, fund a wedding and afford a first child; the average salary for 20-somethings is nearer £25,000.

In November the Office of National Statistics released its latest data on the cost of UK lifestyles, which showed that in 2009 the average household spent £16 a week less than the previous year - the first time expenditure has fallen since current recording methods were introduced in 2001. "In statistical terms that's quite a robust change," said ONS statistician Giles Horsfield. "We noticed that a greater proportion of the weekly spend went on food, and less went on transport and recreation."

Figures for 2010 won't be released until the end of the year, but transport and food will almost certainly swallow even bigger slices of the weekly budget thanks to an increase of about 18 % in fuel costs over the past year, according to PetrolPrices.com, and a 4.2 % increase in groceries, according to shopping website mySupermarket.

The average disposable household income in the UK of £28,354 is clearly not enough to meet a household's daily outgoings. So, the Observer decided to look at typical and - in most cases -essential household costs to work out exactly why we are so broke, whether the situation is likely to get better or worse - and what you can do about the income gap.

Motoring

The expense of running a new car rose to £5,869 last year, with fuel (£1,300) and depreciation (£3,072) the most significant costs, according to the RAC. Owners of used cars faced an average cost of £4,441 in 2010, including £1,396 in fuel and £1,040 in depreciation. With the average cost of a litre of standard unleaded now costing 133.34p and a litre of diesel hitting 139.71p, according to PetrolPrices.com, it will come as no surprise that the cost of running a car is expected to soar this year.

Fuel duty is set to rise by inflation plus 1p on 1 April (the ninth tax increase since December 2008), adding between 3p-4p a litre at the pump and around £50 to the average annual bill. To combat rising fuel costs, drivers should make sure tyres are well inflated and should drive sensibly, get their car serviced regularly to maintain engine efficiency, avoid unnecessary use of air conditioning, and get rid of roof racks to improve aerodynamics. Also consider lift-sharing, try to find the cheapest local petrol - PetrolPrices.com is a useful source - and take advantage of discounts and supermarket deals.

To reduce insurance costs you should shop around for the best deal; consider buying a smaller car; pay your premium up front; park in a driveway or garage; consider a third party fire and theft policy if your car is low-value; and don't overestimate your mileage. Young female drivers, who are expected to be hit by soaring premiums following the recent European ruling banning the use of gender in underwriting, may benefit from the introduction of "black box" based policies which are based on the safety of a policyholder's driving habits.

Mortgages

Thanks to the Bank of England base rate staying at 0.5% for the past two years, monthly mortgage payments have dropped to their lowest levels in 10 years. The average mortgage borrower, according to the Council of Mortgage Lenders, owes £109,110 at an interest rate of 3.5%. The vast majority of mortgages are set up on a repayment basis, and the monthly premium for a loan this size would be £546.23. However, most experts expect the base rate to rise very soon, which will increase the cost of all variable rate deals. Each 0.25% rise in base rate will add £15 to a £109,110 repayment loan, according to moneysupermarket.com.

David Hollingworth of mortgage broker London & Country says most people will opt for a fixed rate to protect themselves against rises. Nationwide building society has a five-year fix at 4.39% with a 70% loan-to-value (LTV) ratio and £999 application fee, while Norwich & Peterborough building society has a five-year fix at 5.38% with an 85% LTV and £995 fee. However, those who are more confident that their finances can absorb some extra costs may prefer to take the risk that the base rate will rise slowly, opting instead for a tracker mortgage. HSBC's lifetime tracker is set at 1.79% above base and has an LTV of 60% and fee of £99.

Food

The FAO Food Price Index rose for the eighth month running in February, up 2.2% from January and at the highest level since January 1990 when the index began. In the UK, certain foods climbed in price at the beginning of the year as VAT rose from 17.5% to 20%, but other items - tea, ground coffee, butter, pasta, fruit juice, bread and vegetables - have shot up still further, according to mySupermarket.co.uk.

Dalia Mays, a spokeswoman for the site, says there to reduce the cost of the weekly shop. Try swapping your regular supermarket for a cheaper one: buy your staples at Asda rather than Sainsbury's or Waitrose. Try setting a budget and shopping online: it means you can buy everything you normally would but you won't be tempted by off-list extras. She adds: "Everyone has the brands they will never swap, such as Diet Coke or Heinz ketchup. But for things you're not too bothered about, try the supermarket own brand, or better still the supermarket value range."

Mysupermarket calculates the VAT increase will cost food shoppers an extra £66 in 2011 compared to 2010. But you can avoid VAT altogether by making crafty substitutions: buy tortilla chips instead of crisps, cream gateaux instead of arctic roll and chocolate chip biscuits instead of chocolate covered ones, unshelled salted nuts instead of shelled ones.

Utilities

Although households benefited from price cuts in 2009, the proportion of the household budget spent on energy rose substantially in 2010 thanks to freezing weather at the beginning and end of the year, and prices have risen by an average of 6.5% over the past 12 months. The average annual dual fuel bill was £819 in January 2008, but now stands at £1,132, according to uSwitch.com. Spokeswoman Ann Robinson said that if Ofgem considers current profits being made by energy companies as reasonable, and oil prices remain high, there is "a reasonable chance energy prices will go up later this year".

Consumers should check whether they can save money on bills and cut the amount of energy they use. Consider fitting an energy efficiency device to help reduce use, and turn things off when they are not in use. Insulating a home or installing an energy efficient boiler can produce longer-term savings.

Paying by direct debit each month will help reduce bills (suppliers offer discounts for paying this way) and consumers should make sure take regular meter readings as estimated bills can be disporportionately higher. Anyone who is concerned about paying their energy bills should contact their supplier to discuss the options.

Council Tax

The average band D household is expected to pay £1,438.87 for Council Tax in 2011, down 35p on last year, according to the Chartered Institute of Public Finance and Accountancy. The government has stumped up £650m to local authorities to allow them to freeze bills this year, although some are still imposing increases.

There's not much you can do to reduce the size of your Council Tax bill. But if you are the only adult in the household, you may qualify for a 25% discount. Other adults may be "disregarded", including full-time students, student nurses, young people on government training schemes or those following apprenticeships, and live in care workers. If everyone who lives in the property is disregarded there will still be a Council Tax bill, but it will be discounted by 50%. Check whether your household qualifies on the Citizens Advice website.

Credit cards

The most vulnerable to debt are those with children because they have less flexibility to reduce their expenditure, which means they are more likely to take out credit to meet living costs. If you want to reduce the interest you pay help may be at hand with MBNA's recent introduction of an 18-month 0% balance transfer card. This sparked a card price war with Virgin Money entering the fray with a deal to match the MBNA card. Barclays then stretched its own 0% interest period on balance transfers from 18 months to 20 months.

While the credit-scoring might be tougher on new cards, switching your debt to a card incurring no interest is a sensible move. Decent deals are also on offer from M&S (0% for 15 months) and Nationwide (0% for 17 months) - but make sure you compare the balance transfer fees and check the length of the offer for new purchases made on the card - the reversion interest rate is always markedly higher

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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COUNCIL TAX REVALUATION 'WOULD HIT POOREST THE HARDEST'

First published by: The Guardian

Communities secretary, Eric Pickles, defends government decision not to revalue Council Tax bands

Eric Pickles said based on a revaluation in Wales, 7m households would be worse off from a similar exercise in England. The government today defended its decision not to revalue Council Tax bands during the current parliament, claiming the exercise would hit the poorest the hardest. The communities secretary, Eric Pickles, announced the move last night, saying families would be up to £320 better off than if a planned revaluation by Labour had taken place. 

Labour said the announcement was "cynical and misleading" as the party had pledged in its election manifesto that it would not have held a Council Tax revaluation in the next parliament. Today Pickles acknowledged that current Council Tax bands were based on dated information, but said there was no need to conduct a revaluation because the current system was fair. In an interview on BBC Radio 4's Today programme, Pickles said that, based on an unpopular revaluation in Wales, 7m households would be worse off from a similar exercise in England. "Let's go back to Wales. 

The people who were hit the hardest were those on the lowest bands, A to C. Something like two-thirds of the increases occurred in those bands in Wales. This would actually hit poorer people harder than it would hit richer people." He said a planned revaluation by the Labour government would have meant the average Band D tax bill would rise by £1,600 a year. "What we want to do is offer some degree of stability. Just coming out a recession I don't really think we should be imposing an extra £1,600 worth of taxation on them," he told Today. Plans for a revaluation of 22m homes in 2007 were postponed by the Labour government in 2005, after the Welsh revaluation prompted anger over Council Tax rises.

Pickles also denied the government was being centrist by denying councils the scope to revalue bands in their areas. "They can raise their Council Tax. We are going to remove capping and allow local people to decide the level of their Council Tax by way of a referendum. So we are taking power away from the centre and giving it to local people," he said. He insisted the current system was fair. "It is the relationship between the top and the bottom bands that's important and the relationship between the north of England and the south of England. They are roughly in the same position that they were 20 years ago. So there is actually no need for a revaluation."

Pickles also announced an independent review of Council Tax inspections, which he said would "rein in intrusive snooping" by restricting the data gathered and stored about people's homes. Inspectors from the Valuation Office Agency (VOA) assess the value of properties for Council Tax purposes, and there has been controversy over their collection of data on features of homes such as the number of bedrooms or bathrooms, whether it has a patio and whether it enjoys a nice view or is in a good neighbourhood. An independent data audit of the VOA would protect privacy and civil liberties as part of the government's agenda of dismantling the "database state", Pickles said.

"We have cancelled Labour's plans for a Council Tax revaluation which would have hiked up taxes on people's homes," he said. "The new government will protect the privacy of law-abiding citizens from intrusive spies-in-the-sky and halt state inspectors from barging into England's bedrooms and gardens. "We are standing up for the people who have pride in their home, and calling time on Labour's state snoopers and surveillance state. "Hefty Council Tax bills are a constant financial worry for many people. Today we are setting their minds at ease, and protecting the interests of the less well-off in particular who were the hardest hit from Labour's Council Tax revaluation in Wales."

A Labour spokesman said the party "made an unequivocal commitment that there would be no Council Tax revaluation in this parliament". "This is a cynical and misleading manipulation of facts," he said. A spokeswoman for the VOA said it was "absolutely not the case" that its inspectors' work amounted to snooping on householders. She said the agency has never exercised its legal right to enter a home since it was introduced by legislation in the early 1990s.

Consumer expert Martin Lewis, of moneysavingexpert.com, said the failure to hold a revaluation would mean 400,000 homes remaining in the wrong Council Tax bands.

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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COUNCIL MERGERS ARE A ONE-WAY DOOR

First published by: The Guardian

Trade unions warn local authorities not to break trust put in them by communities

Labour councillors in Westminster, Kensington & Chelsea and Hammersmith & Fulham are all in favour of any genuine efficiencies. But we believe major long-term changes should not be driven by one party's political agenda. The planned merger would result in services being provided to a population equivalent to the size of Glasgow. Large councils are not necessarily more efficient – there have been many high profile failures when councils have merged services before. 

We believe that there must be cross-party involvement and wide public support for these proposals before they are carried out. Sadly, the Conservatives in all three boroughs have been highly secretive. Indeed, they would not allow their officials to consult any opposition councillors in the three local authorities prior to the announcement and have failed to provide any detailed information since. We also have the following concerns:

The Conservatives are not ruling out using this merger as a mechanism for even more frontline service cuts, stealth taxes and loss of jobs, or as an excuse to undermine local democracy or sell off more community buildings. Nor have they explained how local residents will keep their ability to hold their council to account. They have not explained how any newly elected administration would be able to secede from any part of this if political control changes. They have also failed to explain why these particular local authorities should merge services. 

Already, there appear to be different messages coming from the three Conservative authorities. This confusion does not bode well for the project's success. We call on the Conservatives to take a more open, inclusive and transparent approach to the plans. Cllr Judith Blakeman, Leader of the opposition, Royal borough of Kensington and Chelsea, Cllr Stephen Cowan Leader of the opposition, London borough of Hammersmith and Fulham, Cllr Paul Dimoldenberg Leader of the opposition, City of Westminster 

• As the first chief executive to take responsibility for managing two local authorities, I am writing to express disappointment at your coverage of the proposed arrangement between three London boroughs. The London-centric vision gave little credit to the dozen or more such partnerships that now exist. These have delivered millions of pounds of savings and service improvements and found many lessons for others contemplating this path.

The key to success is the nature of the arrangements that control the joint business. If constructed well, to give the politicians of each partner a real say, this can allow local standards of services to exist alongside the efficiency of a single officer structure and shared services. The thorny issue of what happens if the politics change is answered by the simple truth that once an arrangement is in place, any change requested by any of the partners would need to justify the cost and disruption of creating a parallel structure. In the current climate, local taxpayers are hardly likely to be positive about this. In our Adur/Worthing partnership we have always recognised that each new joint arrangement is probably a one-way door.

Ian Lowrie

Chief executive, Adur district council/Worthing borough council   

 • There have been many times during my years as a headteacher that I have been left bewildered by government policy; however this week's announcement truly surpassed all others. Every school-age child in the country has benefited hugely from their local School Sports Partnership in creating collaborative working between schools, community coaches and specialist providers based on the Olympic values. 

They have increased engagement with sport for pupils and staff and provided a wealth of opportunities. In my own school, involvement in the School Sports Partnership has had a direct impact on raising standards annually, has enabled us to develop an increasingly creative curriculum and to ensure that all pupils, parents and staff appreciate the value of committing to a healthier lifestyle as well as instilling the values of excellence, inspiration, courage, determination, respect, friendship and equality.

However, the coalition government will cease all direct funding for PE and school sport from 31 August 2011, less than one year before the Olympics. The legacy that these games should have will now be in doubt as the funding ends and the systems that have become very well established are left to fragment. 

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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SUPER COUNCIL PLANS CRITICISED AS JOB LOSSES LOOM

First published by: The Guardian

three councils say: they will look at merging street cleaning services.

Radical proposals to create the UK's first "super council" came under fire today as it emerged that significant job losses would result from the plans which aim to generate cost savings of up to £100m a year. The London boroughs of Westminster, Hammersmith & Fulham, and Kensington & Chelsea have proposed to merge all their services, from schools and refuse collection to child protection, under the direction of a single chief executive.Under the plans, which have been backed by communities secretary Eric Pickles, a new authority the size of Glasgow or Leeds would be created, although each council would keep its leader and local ward councillors. 

All three boroughs are currently Conservative-controlled, although Hammersmith & Fulham is regarded as a marginal, and has been led by Labour in recent years. The leaders of the three councils – Colin Barrow from Westminster, Stephen Greenhalgh from Hammersmith & Fulham and Sir Merrick Cockell from Kensington & Chelsea – said that with cuts in central government spending to reduce the national deficit, their priority was to protect frontline services. Funding cuts announced in this week's spending review will see cuts of 26% in local government funding.Pickles said: "These councils are leading the way in local government and voters will expect others to get on board and follow suit. This is exactly the sort of innovation that will help councils to protect hardworking families and the most vulnerable.

"We're supporting these sorts of moves by giving unprecedented freedom and flexibility to councils to make their own choices, funding a Council Tax freeze, and calling time on the bureaucratic red tape and pointless form-filling that has hampered councils for so long. "Sharing services is just one of the options open to councils to ensure they are making the most of every pound they have – alongside moves to become more transparent, improve procurement and cut out waste."

But trade unions warned that the move was in danger of creating a local democratic deficit. Peter Allenson, Unite's national officer for local government, said: "While the severity and speed of the coalition cuts puts horrific pressure on local authorities to cut services, we urge them not to rush into untested structures which could see service users unsure who to turn to when they need help. "From cleansing services to child protection to social care, councils have to be close to the needs of their communities and the people who elect them and pay for them and council workers need to know who is in charge.

"Super-sizing the delivery of services like this means local councillors become insignificant and have little influence on the services they provide. Voters will soon become disenfranchised and wonder what they are paying for. "People know and trust local services and have a sense of ownership. Councils play with this trust at their peril." Greenhalgh told BBC Radio 4's Today programme that there would be "significant reductions in staff".

"Clearly if you have less money to spend you are not going to be able to safeguard every job and we are going to see significant reductions in staff but this is about squeezing every penny, every pound, to protect frontline services," he said. "There is a lot of bureaucracy involved with delivering local services: in adult social care, we often find that of the three pounds we spend, one pound is spent deciding what to do with the other two. "This is about minimising that overhead and we still have political sovereignty, still have the ability to choose how we spend the money locally. What we are doing is ensuring that as much as possible goes to the frontline.

He said cuts to frontline jobs could not be ruled out. Although sharing or merging services is already widespread among smaller district councils, this is thought to be the first time that large metropolitan boroughs, which run more services, have contemplated a merger on this scale. Earlier this year Islington and Camden councils announced that they are to share a chief executive, but it is understood there are no plans for them to move to a formal merger. Andy Sawford, chief executive of the Local Government Information Unit think tank said the merger would have to be well-managed if it was to achieve its aims: "It's not automatic that if you bring together three councils like this that things will be more effective and efficient, but clearly there are opportunities to make substantial savings."

Posting on the Guardian website, Cllr Emma Dent Coad, who represents Golborne Ward on Kensington and Chelsea council, said: "The Labour Opposition in K&C knew nothing about these plans, apart from some vague mentions of joint working in the future. It was agreed in secret by senior Tories who pay themselves full 'salaries' despite having other jobs, and have little to do with their electorate apart from drinkies at Christmas. There is no mandate for this."

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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COUNCIL TAX BENEFIT RETHINK MAY HIT THOSE ON LOW INCOME

First published by: The Guardian

Chancellor's spending review targets half a billion pounds saving in a rebate shakeup to be implemented by local authorities

The chancellor's spending review has indicated plans for a Council Tax benefit rethink that may hit those on low incomes. The chancellor sought almost half a billion pounds from the Council Tax benefits bill by asking councils to draw up plans that would affect millions of people on low incomes. The rebate is paid to people on low incomes – including lone parents, jobseekers and around 3.5 million over-65s who are mostly on pension credit.

Council Tax benefits are not small: on average they are worth a little less than £900 a year and in most cases means the poor live in a property without having to pay Council Tax. George Osborne will not say who loses out from this welfare saving: that responsibility will fall on the shoulders of local authorities who will have to make changes to the benefits' rules, which are so complicated that only two-thirds of those entitled to the money claim it today.

Local authorities are to be given freedoms to make the savings, although academics warn this will simply be a way of shifting the blame from central to local government. At present councils pay out the benefit on behalf of the Department for Work and Pensions. Andy Sawford, chief executive of the Local Government Information Unit, said it was likely councils would probably choose to "stop paying to certain groups". "They could stop paying for long-term unemployed while paying for low-income married couples. It would be an interesting introduction of local diversity."

Sawford said councils could cut 10% from bills but that would mean chasing poor people for "a few pounds a week".

In a related move to save the taxpayer more than £200m,the government announced that single people aged 25 to 35 won't be able to claim housing benefit for a flat. Instead they can only claim for the cost of a single room in a shared house. Originally it applied to claimants under the age of 25 but this will be extended up to 35 – leaving many with few options beyond moving back home or moving in with flatmates.

Experts say that the move will affect "thousands of young people" as housing benefit is claimed by anyone who does not have "capital or savings over £16,000". "Over the age of 25 - I don't think many people want to be sharing," said Debbie Larner of the Chartered Institute of Housing. "I think 35 is a quite unreasonable cut-off point. The average age of home ownership is 37 so I cannot see how this helps with that."

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX.

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