Councils across England have “little choice” but to increase council tax by the maximum amount later this year, due to historically high inflation and “a decade of austerity,” it has been claimed.
Around three quarters of councils are set to propose an increase of at least 4.99% this April, with only one local authority so far confirming that council tax will remain at the same level as last year, according to research by the County Councils Network.
While deprived areas are more likely to be protected from higher increases than wealthier areas, the vast majority of councils have said they will propose a rise in the coming financial year.
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Upper-tier local authorities are able to increase council tax by a maximum of 4.99%, made up of 2.99% for general council tax and a further 1.99% which is ring-fenced for adult social care - one of the largest expenditures for most councils. Councils may also opt to hold a local referendum on raising council tax by more than this amount.
Of the 114 councils which have published their plans for council tax in the coming year, 84 will propose an increase of the maximum amount - meaning an annual increase of around £99 on average for those in Band D homes, although this will differ significantly across the country.
Among the remaining councils, the rate of increase ranges from 2% for Westminster, Tower Hamlets and Telford and Wrekin, to just under the maximum threshold at around 4.9% in Worcestershire, Hartlepool and Stockton-on-Tees.
Among the 25% of the most deprived councils in England, 16 out of 28 are set to propose the maximum increase. This compares with 24 out of 28 among the 25% of least deprived areas. This means households in poorer areas are more likely to be protected from higher increases, although this could have more of a knock-on effect on locally-delivered services in these areas.
Antonia Jennings, associate director of the Centre for Local Economic Strategies, said councils are proposing the increases “as a last resort revenue raiser, after a decade of austerity has left many resting on the edge of bankruptcy”.
She said: “Cuts to council budgets haven’t been evenly spread, equating to £300 per person in some regions, and ‘new’ pots of money allocated to councils, such as the Levelling Up Fund, haven’t gone close to restoring previous funding levels - Levelling Up round 2 allocations equated to £22 per person in Yorkshire and Humber, for example.
“Council tax is also unfairly implemented, as it is based on house prices back in 1991 - over 30 years ago. This story today is one of avoidable unfairness across the board - to councils, the essential services they provide, and residents.”
Just one local authority has said it will not increase council tax. Central Bedfordshire is among the least deprived areas in England.
Councils face major deficits despite tax rises
Around 40 councils are yet to publish their council tax proposals, although most are expected to announce increases of up to 4.99%. Among those yet to publish their plans are some of the most deprived places in the country, including Knowsley, Gateshead and Hackney.
Earlier this month, Levelling Up Secretary Michael Gove confirmed that three local authorities will be able to increase council tax by more than 5%, to help ease significant financial difficulties.
Thurrock and Slough will be allowed to raise council tax by 10%, while Croydon will be able to implement a 15% increase - meaning an average annual rise of almost £250 for a Band D household.
Sam Corcoran, Labour vice-chairman of the County Councils Network and leader of Cheshire East Council, said: “With inflation reaching levels not seen for over 40 years and with demand-led pressures for care services showing no sign of abating, local authority leaders are setting their budgets in the most difficult circumstances in decades.
“We all recognise the cost-of-living crisis is impacting on every household in the country and disproportionately on low incomes, but we have little choice but to propose council tax rises again next year, with many local authorities reluctantly opting for maximum rises.
“With councils facing multi-million funding deficits next year, the alternative to council tax rises would be drastic cuts to frontline services at a time when people at the sharp end of the cost-of-living crisis need us to be there for them. With the financial situation for councils looking extremely tough for the next few years, we will be calling on the Chancellor for further help in the March Budget.”
Even accounting for a 4.99% council tax rise, Hampshire County Council (which gets 89% of its revenue from local tax) faces a £57.7 million funding deficit in 2023/24 which the authority says will have to be filled by reserves.
Durham Council faces a £10.2 million deficit even after proposing £12.4 million in savings and a 4.99% council tax rise. Cheshire East Council faces a deficit of £25.4 million which will be filled through savings and council tax rises.
Andrew Dixon, chairman of the Fairer Share campaign, said the rises are “unlikely to change the already very uneven council tax burden”.
Fairer Share has called for major reform of the council tax system, which currently sees poorer households paying proportionately more than those in wealthier areas. Dixon has criticised both major parties for failing to propose meaningful changes to the system.
He said: "With millions around the country already struggling to get by this winter, they’re now having to pay out even more to plug local funding gaps. Council tax is one of our most unfair taxes and these 5% increases will hit the hardest in the poorest areas of the country, sending many into spiralling debts.
Research by Fairer Share shows that council tax for residents of Westminster and the City of London is less than 0.1% of property value, compared with more than 1.4% in Easington and 1.3 in Hartlepool.
“The Government has - so far - sat and watched this crisis unfold, rather than taking action to reform local government funding. The Labour Party is also yet to offer a solution to this emerging crisis. The concern is that if we don’t make changes soon, neither households nor local authorities will be able to take the strain."