CLG officials are engaged in an ‘ongoing dialogue' with CIPFA over the impact of accounting changes which could lead to higher council taxes next year. Last week, CIPFA warned that changes to the way town halls must account for staff holiday pay under new international accounting standards, due to be introduced from April 2010, could push local taxes up by a premium of 3% above councils' planned rises. Critics of the council tax system immediately seized on the warning, claiming the rise was further proof of the inadequacy of the UK's local tax regime, which has seen some bills double since the Labour Government came to power in 1997. But a senior CLG source retorted: ‘This is a storm in a tea cup and will not have the impact some media outlets have claimed. It is merely an accounting change required under international rules. CIPFA has, quite correctly, warned it could, in theory, have an impact on tax rates. So we are engaged in dialogue with CIPFA and other expert bodies over how to mitigate this.' Under the change, councils must account for two years' staff holiday in their 2010/11 accounts, ostensibly increasing their cost base. CIPFA initially warned the switch could force some unitaries and counties to increase local taxes by 3%. But the institute later released a statement tempering its warning. ‘CIPFA can clarify it does not expect to see an increase in the council tax as a result to the move to international financial reporting standards (IFRS),' the statement reads. ‘The move to IFRS will result in changes to the way councils account for holiday pay. On its own, this could have lead to rises in council tax. However...CIPFA is confident the Government will act to stop this happening.'
