In the first public statement on the proposal since the Andrews Labor government came to power a fortnight ago, Local Government Minister Natalie Hutchins has confirmed future council rate rises will be restricted to CPI increases.

The decision is expected to be welcomed by ratepayers, but will put Labor on a collision course with councils and representative bodies including the Municipal Association of Victoria.

It is expected to force a major re-examination of how councils operate with the annual loss of millions of dollars. 

But Ms Hutchins appears determined to press ahead.

“Local residents have had enough of wasteful council spending and increased council rates,” a spokesperson for Ms Hutchins said.

“(Prime Minister) Tony Abbott and the Liberals are already increasing taxes and charges on Victorians and local councils shouldn’t make it worse.

“It is why the Andrews Labor government will cap council rate increases and reduce the waste.

“The councils will have to focus on the services people need and not the stunts that drive up rates.

“The council budgets will come under the scrutiny of an independent commission and unnecessary spending will be exposed.”

The minister’s statement said the government would consult with the Municipal Association of Victoria, the Victorian Local Governance Association and the Australian Services Union on the guidelines for the independent umpire.

Municipal Association of Victoria president Bill McArthur said his organisation remained vehemently opposed to the introduction of rate-capping.