Chancellor George Osborne has vowed to freeze council tax for the third year running and give taxpayers the right to challenge their local authority through a referendum, if they want to raise it by more than 2%.
The government will launch a new grant scheme to release £450m to local authorities that either freeze or reduce their council tax bills next year. If they do, councils, police and fire authorities will stand to receive £225 million of funding in 2013/14 and 2014/15, equivalent to raising their 2012/13 council tax by 1%.
In 2013/14, the government will propose to lower the local authority tax referendum threshold to 2%. Such a move means that should a local authority plan to raise its relevant amount of council tax by more than 2%, local residents would have the right to keep bills down through a binding referendum veto.
The secretary of state for communities and local government will formally set out the detail of the policy in December.
The Treasury says that over the last two years the government has provided grants of around £2bn to help freeze council tax. A freeze in council tax in 2013/14 would represent a real terms cut of around 2% and a fall of 9% in real terms over the past three years.