Frosty Reception For Osborne's Tory Tax Freeze

by Robert Lee, Tax-News.com, London

03 October 2008

UK Shadow Chancellor George Osborne is facing an increasing backlash from central and local government representatives over his announcement that he would abolish increases in council tax for the two years subsequent to the election of a Conservative government.

Under the basic guidelines of the proposal, any council that makes savings to keep its annual council tax increase to 2.5% or below will receive additional money from central government to reduce council tax bills by a further 2.5%.

Osborne said that this central government funding will be raised by reducing spending on expensive private sector consultants and advertising by GBP500 million in the first full year of government, and by GBP1 billion in all subsequent years.

However, according to opinion polls carried out in the days following Osborne's announcement, local council leaders have unsurprisingly shown little enthusiasm for the idea, and have branded it as little more than an elaborate election campaign which could end up having damaging consequences for several of the UK's other services.

Councils are now worried that Osborne has failed to recognise the potential impact the tax suspension could have upon public funding, predicting that they will have to re-introduce council tax at much higher rates in the years following the freeze and cut the amount of funding available for other sectors, such as schools and housing, in order to compensate for losses.

Local government minister John Healy has attacked the shadow chancellor's plan as a "con" pointing out that the current government grant increase is 3.5%, and that Osborne's proposal would leave a GBP300mn funding gap this year alone.

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