Council tax bills could hit £1,500 by the end of Labour’s third term in office, the Tories claimed yesterday as the Government announced a 3.7 per cent increase in central funding for town halls.

Local council chiefs said that, as a result, council tax bills next year are again likely to increase by about 5 per cent, twice the rate of inflation. Londoners are expected to be the hardest hit because of a lower settlement for the capital.

Details of the grants, disclosed by the Department for Communities and Local Government, showed big variations in allocations across the country, ranging from 2.7 per cent to over 9 per cent. Eric Pickles, the Tory spokesman, said that council tax had “gone through the roof” since Labour came to power in 1997. With 5 per cent increases for the next three years, the average bill could hit £1,500 by 2009-10, he said.

Twenty of the 32 London boroughs will get only the minimum 2.7 per cent rise in central government funding for 2007-08, while some shire counties such as Dorset and Norfolk are in line for increases of nearer 9 per cent.

Some London councils have done well, however, because of increasing populations, which means that they receive more cash. Camden gets a 6.2 per cent rise while wealthy Kensington and Chelsea receives a 5.6 per cent boost.

Councils with the minimum 2.7 per cent increase outside London include Liverpool, Solihull, Wakefield, Bournemouth, Brighton and Hove, Reading and Portsmouth.

Phil Woolas, the Local Government Minister, confirmed that English councils overall would get an extra £3.1 billion next year to boost funding, including schools, to £65.7 billion, a rise of 4.9 per cent. He said that the stable and “adequate” funding package would enable councils to keep tax rises to less than 5 per cent. But he also gave warning that if councils imposed rises above 5 per cent they could be capped.

Tony Travers, local government expert at the London School of Economics said: “This is the last settlement of its kind before the Lyons inquiry hits the streets. The Government cannot simply use the threat of capping as a long term answer to the problem of local government finance.”

Grant levels

Highest increases

Isles of Scilly 12.1%
Dorset 9.5%
Rutland 9.2%
Wyre 9.1%
Daventry, Northants 8.8%
Allerdale, Cumbria 8.8%
Harborough, Leics 8.7%
East Cambridgeshire 8.6%
Weymouth and Portland 8.5%
Norfolk 8.4%

Minimum increase of 2.7%

Dartford, Kent
Tunbridge Wells, Kent
Havant, Hampshire
Preston
Corby
Alnwick
Oxford
Liverpool
Newcastle-upon-Tyne
Islington, North London

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