Contract costs blamed for inflation-busting council tax rise

Council taxes will go up next year due to the rising cost of private sector contracts.

Increasing fees for services such as rubbish disposal, road repairs and support for the elderly will result in householders facing tax rises of at least four per cent next April.

The inflation-busting rise has come about due to the cost of such services spiralling from £10 billion to £18 billion in just five years.

It is predicted that the average band D bill will rise to more than £1,300 next year.

Council spending on private sector contracts has nearly doubled in the past five years and now accounts for 20 per cent of local government expenditure.

Ministers have set up an inquiry to review the situation with councils and private firms. Heading the review is the chairman of the local government association, Lord Bruce-Lockhart.

He said: "If we are trying to bring down public sector costs as a whole, we have to try to bring down private sector inflation."

The problem is illustrated by the growing cost of rubbish collection services.

Ministers fear that companies such as Cleanaway, Grundon and Sita have councils over a barrel and thus dictate their own terms.

Paul Bettison, chairman of the Local Government Association's environmental board, said: "(Councils) may decide to offer rubbish collection on the three Bank Holidays over Christmas, for example.

"The private sector would argue (that it is best) to skip that week but, if the authority wants to maintain a service, they pay extra."

Firms are also reluctant to enter an expensive tendering process for services and so councils depend on the same well-known companies.