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By Kerry Lorimer ...
By Kerry Lorimer

The blame game over council tax rises took an intriguing twist last week when an Audit Commission report placed the bulk of the responsibility at the door of the government.

Lack of transparency over the way central government calculates its annual grant to councils was one of the 'fundamental flaws' identified by the commission in the local government finance system.

The report found 'a clear association' between the amount of grant a council received and the level of council tax increase, but no correlation between tax hikes and either political control or comprehensive performance assessment category.

The report was seized on with nothing short of jubilation by local government, which has long claimed the record increases seen this year are attributable not to local profligacy but to the tendency of government to demand extra spending in priority areas without backing up the demands with cash.

Local government minister Nick Raynsford moved quickly to stress that the report itself, unlike the commission's press statement and the publicity that followed it, identifies 'a range of contradictory factors, some of which are the responsibility of central government and some of which are the responsibility of local government'.

But Tony Travers, director of the Greater London Group at the London School of Economics, says that although commission chairman James Strachan has been careful not to blame the government in his own public pronouncements for the rises in council tax, it is obvious from the report where the commission believes responsibility lies.

'Orally, the chairman has been careful not to be drawn, but the only interpretation that can be given to the report is one that is fiercely critical of the government,' he says.

David Curry, Conservative shadow secretary for local and devolved government, says the report is a 'damning and devastating indictment of Labour's approach to councils and council tax'.

He adds: 'This independent report has said what C onservatives have been saying all along - this year's council tax rises are the fault of Labour and [deputy prime minister] John Prescott.

'When not fiddling the local financial settlement he has been increasing spending pressures on councils, the tone signals forcing them to raise council tax.'

Kit Malthouse (Con), deputy leader of Westminster City Council, which increased council tax by 28% last year, says: 'Ultimately, ministers cannot promise extra money for public services on the one hand and take away our ability to deliver that investment with the other.

'Local government is elected to address local needs as well as national priorities. If ministers are to avoid council tax increases, they must either give us, or allow us to raise locally, the money to fund both their, and our requirements.'

But Mr Malthouse takes issue with the commission's suggestion councils are under insufficient pressure from peer pressure and the threat of capping to minimise council tax rises, saying 'internal discipline and sound business planning' should drive down the level of increases.

Dennis Reed, chief executive of the Local Government Information Unit, says the commission's findings are in line with the LGIU's own research, which suggested councils had been unfairly censured for tax rises.

'All of the experts can't be wrong,' he says. 'It will no longer be tenable to portray local authorities as responsible for excessive council tax increases. It is now vital to move the debate beyond the blame mentality.'

One body which will be taking a particularly keen interest in the commission's findings is Mr Raynsford's own balance of funding review group, due to report back next summer on a year-long investigation into the way local government is funded.

The outcry over council tax increases has put the group under pressure to produce radical solutions to the funding problem, although Mr Raynsford has ruled out the replacement of the council tax with a local income tax (LGC, 28 November).

CIPFA says it is 'imperative' the review group takes account of the commission's report.

'The present imbalance in local government funding distorts the scale and impact of council tax rises as a result of the gearing effect,' says Maureen Wellen, CIPFA's assistant director for local government finance and policy. 'It also affects the ability of local authorities to be transparently accountable to their electorates for the resourcing and delivery of local services.'

Perhaps the most interesting aspect of the report is what it says about the willingness of the commission to challenge ministers.

According to Mr Travers, that in itself signals an important change in direction for the commission.

'This is a brave intervention by the Audit Commission, which is indicative that the commission is changing its role somewhat,' he says.

'It is clearly going to look at the way in which government policy hits local government more than in the past, including the obvious inconsistency between the demand from different departments for spending, and the demand for low council tax rises.'

As a government-appointed body, the commission is quite right to exert its independence, says Mr Travers.

'The commission has taken the view that if it cannot do this kind of research, which is critical of the government, then there's no point in having [a commission].'

Although the report is being seen as symptomatic of the commission's desire to assert itself under the stewardship of Mr Strachan and new chief executive Steve Bundred, this is not the first time the commission has taken a critical line on government policy. Under the chairmanship of Sir John Banham in the 1980s, it produced a damning report into the needs assessment element of the grant allocation system.

For a watchdog routinely accused of cronyism and failure to assert itself as anything other the government's poodle, these shows of independence are particularly significant. Having stuck its neck out once again with this report, the commission may now feel it is on a surer footing when it comes to taking a firm line on government policy - which means more embarrassing interventions could be in store for the government.

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