Council tax could now rise by five per cent year after Peterborough City Council suffered another cut to its government grant.
The Conservative councillor in charge of the authority’s budget has said it is a choice between “further savings and efficiencies” or increasing council tax.
The council on Wednesday (December 14) agreed to increase council tax by four per cent next year - two per cent of which will go to adult social care - but the Government is now allowing councils to increase the adult social care precept by another percentage point next year.
If the council chose to levy this, it would generate an additional £600,000.
At Wednesday’s meeting, the city council agreed proposals to wipe out its current deficit of £19 million, but just a day later it was also told to find an extra £700,000 of savings after the Government cut its grant once again.
The extra deficit comes from the Government cutting back on the amount of money it pays in New Homes Bonus.
The bonus, which rewards councils for levels of housebuilding, used to be paid for six years. But from next year this will be reduced to five.
A minimum level has also been introduced for the number of homes that have to be built before the bonus is received, therefore further reducing the amount of money the city stands to receive. As a result the council will receive £1.5 million less next year in New Homes Bonus funding.
But the Government is using the money it is taking back from the New Homes Bonus to provide councils with additional funding to spend on adult social care.
However, the council’s additional allocation for adult social care will be £0.8 million, leaving it with a net reduction of £0.7 million.
Reacting to the announcement, Councillor David Seaton, cabinet member for resources, said: “Unfortunately the news is no great surprise to us in Peterborough although clearly we have done even worse than expected. Overall we look at this stage to be £0.7 million worse off than we expected to be.
“The Government has given to us in one hand through the adult social care grant but they have also taken money away from us and in effect penalised us for being a growing city. For example, the changes to the New Homes Bonus mean that we will now not receive £1.5 million next year which we were expecting to.
“Overall we are now in a worse than expected position next year and we will now have to make the difficult choice between making further savings and efficiencies in our phase two budget setting process or increasing council tax by a further one per cent.
“It provides us with a huge challenge to protect vital services while finding a way to ensure that our great city continues to thrive.”
The council announces its second and final set of 2017/18 budget proposals in January.