THE Government has scrapped a penalty system that has cost Worcestershire County Council millions of pounds.

Worcester MP Michael Foster welcomed the abolition of the Council Tax Benefit Subsidy Limitation Scheme.

He said the move would allow the local authority to limit Council Tax rises - or increase them at the same level as planned before the scheme was scrapped - and give the extra cash to education.

This could be worth an extra £1.6m to the county's cash-strapped schools, he said.

The scheme was introduced to curb excessive increases in council tax, by penalising the council each time they raised taxes above a set figure of 4.5 per cent.

The council had to give a percentage of the extra cash it raised back to the Treasury.

For this year, the penalty paid by local taxpayers is £1.6m. It was set to rise even further next April.

Wide-ranging

But Local Government Secretary Stephen Byers has announced the end of the scheme as part of a wide-ranging review of local government finance.

Mr Foster said he had raised the issue, along with Redditch MP Jacqui Smith, at a meeting with Mr Byers last month.

"We fully support the principle, but the reality was it penalised council taxpayers in Worcestershire," said Mr Foster.

"He told us then the scheme was being reviewed.

"The title of the scheme is a real mouthful. It's highly complex to operate, and very few people understand how it works, so it was never going to be the target of a populist campaign, but the decision to scrap it has been good for the county.

"The local council can now choose what to do. It can keep tax levels lower, or spend more on services. It will be their decision.

"One option is to use the extra money on the county's schools. That would give an increase of not just £12.3m next year, but of almost £14m."

Pouring the extra cash into education would be welcomed by headteachers, some of whom are unhappy with the size of next year's spending settlement.

They are pressing on with plans to take the Government to the High Court for discriminating against local youngsters.