Tories fear higher council tax bills

The Ministers responsible for local spending in Scotland, England, and

Wales are desperately fighting a proposal that the increase for 1993-94

should be limited to 2.75%.

This would leave them short of money for grants for local services and

open the way for soaring council tax bills for which the Government

would take the blame.

Scottish Office Ministers have already met to decide what to do if the

provisional decision stands.

They have the option of allocating a larger proportion of their total

block grant to cushion the tax and making deep cuts in other programmes

like health, roads, and education.

The alternative is a poll tax-type voter backlash as steep bills drop

through letter boxes.

Scottish Secretary Ian Lang, Environment Secretary Michael Howard, and

Welsh Secretary David Hunt have warned Cabinet colleagues that scrapping

the poll tax will avail the party nothing if its successor becomes

equally unpopular.

They argue that extra money is needed to ensure that those who were

gainers under the poll tax -- people living alone -- do not become

losers under the new tax. The argument will continue at this morning's

public spending Cabinet after a two-hour session yesterday and a four

and a half hour meeting on Monday night.

Although tomorrow's Cabinet is supposed to be the deadline for final

decisions, officials were conceding that Ministers might have to meet on

Friday or even over the weekend to finalise the package the Chancellor

of the Exchequer, Mr Norman Lamont, will present in his autumn statement

on November 12.

While Downing Street was emphasising even more strongly that the

Cabinet would limit total spending to the #244.5 billion target they set

themselves, it was emerging that the Chancellor will be including in his

statement a further number of measures allegedly outside the normal

public spending round.

This looks like the creative accounting which some in Whitehall and

Westminster were saying was the only way the Government could

technically stick to its target.

Government sources denied that the autumn statement would turn out to

be a mini-budget but it seems certain to break new ground in seeking to

attract more private money for public projects.

The new Cabinet system of round-the-table discussion of next year's

spending plans may be more open than the old one but it is proving more

protracted and some departmental bids have still not been considered.

Meanwhile, Building Employers' Confederation chairman Sir Brian Hill

warned Mr Major that the Cabinet public sending decisions were

''absolutely crucial'' to the construction industry.

He said that there was ''no second chance'' to put Britain on the road

to recovery and Mr Lamont's autumn statement must help construction,

boost the housing market, and cut interest rates ''substantially''.

Sir Brian added: ''If the right decisions are taken, construction can

lead the economy out of the recession.''

If the chance is missed, unemployment will continue to soar and the

recession in construction will get worse, he warned.

It was vital to go ahead with large construction projects such as the

London Underground extension to the Jubilee Line, but they were not

enough on their own. Other measures suggested included:

* A further substantial reduction in interest rates.

* Raising the threshold of mortgage tax relief, now #30,000, for a

limited time to get the housing market started.

* Lifting stamp duty from house purchases.

* Using local authority capital receipts to boost social housing

activity by Housing Associations, and the repair and maintenance of

public sector housing stock.

* Substantial repair and maintenance work on Britain's schools and

hospitals.