Town halls face council tax capping

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Ministers promised to cap "excessive" council tax increases, insisting local authorities will have had a 45% increase in central funding between 1997 and 2011.

But councils said they were facing their tightest squeeze yet after the three-year allocation. The Tories accused the Government of pushing town halls over a precipice.

The Local Government Association said many councils - particularly shire districts and those in London - would see their real-terms funding decline between 2009 and 2011. That was while they were having to cope with additional pressures on services from migration, the growing number of pensioners, the rising costs of landfill and the expense of free bus travel for the over-60s.

LGA chairman Sir Simon Milton said: "In certain parts of the country the money councils will receive, when faced with the increased pressure on their services, will make it the worst settlement for a decade.

"The impact across England will vary as there is no one-size-fits-all, but in some regions local councils will have to make tough choices between spending cuts and council tax rises above inflation."

He added that councils were making more efficiency savings than any other part of the public sector and urged ministers to recognise the strain upon services. "Many council leaders will be scratching their heads as they try to work out how they will deliver ever better services for local people with less money than in recent years and with greater demands on services," Sir Simon said.

But local government minister John Healey maintained that difficulties facing councils had been taken into account in the settlement.

Councils' revenue funding will rise by 4% to £70.4 billion in 2008/9, by 4.4% to £73.5 billion in 2009/10 and by 4.3% to £76.7 billion in 2010/11.

Formula grants will also go up, by 3.6% to £27.5 billion, by 2.8% to £28.2 billion and then by 2.6% to £29 billion. Councils will also be expected to save £4.9 billion in efficiency savings over the next three years.