News of the government's decision came in a parliamentary written answer from Hilary Armstrong, the local government minister.

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All of the city's money comes from property tax, and as property prices went into freefall, the local government's income was slashed.

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"We have clarified the intention of the Government's policy on public sector pay, as announced in the Chancellor's budget statement, and its implications for local government, " says the letter from the employers association's chief negotiator, dated 8 July.

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