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Tax increases challenge Healey

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A cluster of local authorities face council tax capping after proposing rises of 4.9% - despite the government insisting the national rate of increase should be “substantially' below 5%.

Burnley Borough Council , East and South Cambridgeshire District Councils have now all announced proposals for 4.9% hikes after a group of councils revealed similar increases last month.

More councils, many of them districts, are expected to follow suit as they reel from the impact of concessionary bus fares and a fall in income from charges including planning fees.

The rises come despite local government minister John Healey stating he was prepared to take “tough capping action”.

Explaining his authority’s increase, Reigate & Banstead Borough Council ’s executive member for finance and economic development Richard Wagner (Con) said: “The rising costs of providing services far exceeds our derisory grant increase from government, which in effect is a funding cut.”

A Department for Communities & Local Government spokesman said: “The government has repeatedly made clear its expectation that the average increase in England should be substantially below 5% in 2009-10, and that it is prepared to take capping action against excessive increases.”

Research published by the Chartered Institute for Public Finance & Accountancy revealed 26 councils last year posted hikes of 4.9% or above. A Local Government Association survey concluded that this year’s increase will be about 3.5%.

Councils were also hit by a half-point interest rate cut last week, as rates dropped to 1%. The LGA predicted councils would earn£600m less interest this year.

Deloitte local government partner Mark Lawrie said: “While returns on council money is falling, borrowing costs are not falling by the same proportion because the banks are still reticent to hand on the cuts.”

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