Seven high spending local authorities have been identified for capping this year, local government minister Nick Raynsford has announced.

Government Response: Office of the Deputy Prime Minister

Nick Raynsford, local government minister, said: "We have always said we would use our capping powers if authorities set excessive budgets.  Today we are keeping that pledge.

"This is not a step we are taking lightly. First and foremost it is for authorities to set their own council tax. But we have a duty to protect taxpayers from excessive council tax rises.

"This year we have invested extra £3.7 billion in grant to local government - an increase of 7.3 per cent from last year.

"For the second year running every council in England has had an above inflation increase. In total we have increased grant to councils by 30 per cent in real terms since 1997.  This level of funding should not lead to excessive budget increases.

"We have decided to designate six local authorities and one fire authority for in-year capping.  These authorities now have 21 days to respond. After this we will either proceed with in-year capping or we will take action on their budget for next year.

"In the case of the further four fire authorities and three police authorities, we have decided to limit their spending powers for next
year rather than cap this year's budgets.

"We have constantly made it clear we were prepared to use these powers. And these warnings have already had an effect - many councils did lower their council tax rises.  But some still set budgets which were excessive, which is why we're acting today".

Party Response: The Conservatives

Shadow local government minister Philip Hammond said:“What the government has done is apply a sticking plaster to a gaping wound.

“The capping process, which the government promised would be a lifeboat for pensioners and those on fixed incomes, has ended up as a shipwreck of a policy: unfair, untransparent and ineffective.

“It is designed to distract public attention from the real problem: this government, which has loaded councils with extra burdens and bureaucracy without funding them properly and gerrymandered funds away from well-run Conservative authorities to badly-run Labour ones.

“For all the bluster and posturing, at the end of the process, Council Tax payers, Councils and Local Authority Service Users have once again been let down by Labour.”

Forum Response: Local Government Information Unit

Dennis Reed, LGIU chief executive, said: "It is farcical that council taxpayers under these capped local authorities stand to pick up the £7 million wasted on the cost of being rebilled, as they wait for their local services to be savaged, in order to cut council tax bills that central government policy has pushed upwards.

"If ministers insist on capping these local authorities, the cost of rebilling their council taxpayers ought to come from Whitehall's public relations budget, given that the whole charade is a cynical piece of spin designed to meet ministers' short term political needs at the expense of local democracy and local services.

"Ministers have painted themselves into a corner over capping. Now local communities will suffer to get them out of it.

"Capping remains a crude instrument based on dubious criteria. Some councils with no record of high spending have been caught simply because their council tax increase this year was pushed up by factors such as changes in government grant distribution, rising costs such as those of reorganisation and new obligations imposed by ministers, but not fully funded.

"Often with their reserves depleted, these councils were left with no alternative but a higher council tax.

"One of the local authorities being capped is rated by the Audit Commission as 'excellent' in its management. The extra 'freedoms and flexibilities' that such councils were promised, such as not being capped, means little if they cannot even set their own budgets free from central control freakery.

"With recent findings by the Audit Commission, confirmed by our own research, highlighting central government policy as the chief cause of council tax increases, the LGIU will support local authorities in the campaign against capping.

"It is important for those who rely on local services, over-pressured council tax payers, and the principle of local democracy, for ministers to abandon capping and get on with the job of reforming local government finance.

"This situation is largely a consequence of councils' present reliance on Whitehall grant for three quarters of their funding.

"Small changes in Whitehall grant distribution, or in local spending plans, have a disproportionate effect on council tax bills. If the council tax was fairer and most council revenue was to be raised locally from a broader range of sources, ministers would find their dilemmas over capping receding. Moreover, local democracy would be stronger.

"This is not about being tough or soft on local authorities. It is a question of whether holding councillors to account is a job for local electors or for central government."