The chancellor, George Osborne, has announced a plan to encourage local government to freeze the cost of council tax this year.
The government is unable to prevent councils from increasing council tax rates. However, it has set up a £805 million fund as an incentive for councils to hold off from raising their council tax charges, or at least limit them to an increase of no more than 2.5% this year.
The fund will help councils to cope with the loss of revenue that an increase in council tax rate would usually bring. The £805 million is expected to be generated from efficiency savings across government departments.
The new proposal is similar to the one which was part of an agreement the coalition government made when it formed after the last election. The first plan resulted in a freeze or reduction of council tax charges across the local authorities in the UK in 2011/2012.
A freeze on any rise in the council tax charge at the end of this year will amount to approximately £72 per year in savings for British families.
When the Tory party was in opposition they had promised to freeze council tax charges for two years. The chancellor has indicated that the first year’s plan was a success. He pointed to underspending in the government departments at the half year mark and added that the government was doing what it could to help families in difficult times.
Experts have indicated that it is not unusual for government departments to spend under their budgets, but Mr Osborne has indicated that often they sit on the savings made. He added that in the present climate, it was necessary for the government to use these savings to help people out wherever they can.
In Scotland, the SNP had pledged to place a freeze on council tax increases for five years and they are to be awarded an extra £67.5 million in their block grant. However the Scottish ministers have not decided how this money will be spent.
The Welsh government will also be given a similar financial incentive to freeze council tax charges. Chris Leslie, the shadow Treasury minister for the Labour party, said: “Out-of-touch ministers don’t seem to understand that people are struggling with rising prices and energy bills now, but this policy means no help for another six months. It would mean just £72 for a typical household, which is a fraction of the extra £450 a year the Tory VAT rise alone is costing a couple with children.”
A spokesperson for Unison suggested that the coalition government has announced the freeze as a measure to appease voters and they had already saved millions by freezing local government pay and changing local government pensions.
Other experts have suggested that Mr Osbourne is using this announcement to show that he is aware of the troubles faced by working families and how their income is being squeezed.