Council tax freeze to save families £800m as Osborne seeks to ease burden on households

Published 03rd Oct 2011

Announcement: George Osborne is to spend £800m to ensure there are no painful increases in council tax, saving the average family £72

Chancellor George Osborne said he will spend more than £800million to enable local authorities to avoid painful increases

Council tax is to be frozen again next year, the Chancellor will announce today, as the Government attempts to ease the financial strain on households.

The move will cost the Government £800m to implement but will save the average family £72 next year.

It is the second year that council tax has been frozen and means the tax will not rise before April 2013 at the earliest.

Council tax in England doubled under Labour, with the average bill for a Band D home rising to £1,439 a year.

Mr Osborne will say: ‘I want to help families and pensioners with the cost of living.’

The spending commitment, to be funded from ‘underspends’ in Whitehall, comes as a surprise after repeated Government claims that there is no room in the public finances for tax cuts.

The Chancellor is also thought to be planning to use more unspent money from Government departments to inject into capital projects to try to kickstart the flatlining economy.

Both Mr Osborne and the Prime Minister will insist the cash can be found without deviating an inch from the Government’s tight deficit reduction plans.

Those plans are in danger of being derailed as the economy stalls. GDP grew by just 0.2 per cent in the second quarter and the consequent reduced tax haul has meant that government borrowing has had to remain high.

The latest phase of the financial slowdown has been characterised by battered consumer confidence, with households dramatically pulling back from unnecessary spending as the cost of living soars via higher food, petrol and energy bills.

The reduced consumer spending has discouraged businesses, which have benefited from cuts to corporation tax and a delay to a rise in National Insurance for employers, from expanding and hiring more staff because they can't see their investment being matched by demand from consumers.

The Government has been under pressure to complement austerity measures with a coherent strategy for growth and measures to put cash in the pockets of hardworking families.

The Government will hope that the freeze in council tax - which will cost £800m - can help.

Aides said the Chancellor will use his address to the conference today to accept that the cost of living is ‘the big issue’ for most families.

But he will insist that the deficit reduction plan is more important than ever, given the debt crisis overwhelming countries such as Greece.

A resolution to the turmoil in the eurozone, he will say, would be the biggest single boost to confidence in Britain.

The Chancellor will insist that he has a longer term plan for growth, highlighting his plan to cut corporation tax to the lowest level in the G20 group of leading nations.

He will also confirm that the qualifying period for unfair dismissal claims is to rise from one to two years.

Last night Mr Osborne announced plans to set up new enterprise zones to deal with the fallout from the decision by defence giant BAE Systems to slash 3,000 jobs in the north of England.

The zones will encourage firms to expand or relocate to the BAE sites at Warton and Samlesbury, in Lancashire, and Brough, in East Yorkshire.

Prime Minister David Cameron yesterday ruled out any U-turn on spending cuts, but went out of his way to suggest that he understood the ‘shocks’ to family finances.
No U-turn: David Cameron said he understood the shocks family finances were experiencing but said there 'was something better at the end of this'

No U-turn: David Cameron said he understood the shocks family finances were experiencing but said there 'was something better at the end of this'

‘We have got to explain to people there is something better at the end of this,’ he declared.

‘I think one of the biggest shocks for people has been the electricity increases, the gas increases. Put that on top of what’s happening to the family shop, what’s happened at the petrol pumps... these things combined are making life difficult.

‘We are doing the right thing, but we’ve got to explain all the time why it’s necessary, how we’re going to help people.’

As the Conservative party conference started in Manchester yesterday, David Cameron said there were ‘elements of truth’ to the idea that Britain was in the economic equivalent of a war.

He said the debt crisis engulfing the eurozone was a threat not just to the British economy but that of the entire world.

Angela Eagle, Labour’s Shadow Chief Secretary to the Treasury, said: ‘David Cameron is so out of touch with what’s happening to jobs and the cost of living that he seems more interested in protecting a plan that isn’t working than protecting our economy.

‘With unemployment rising and the recovery choked off last autumn the Prime Minister is stuck with the old lines and has nothing new to say.’

Source: ' ThisIsMoney '

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