UK council tax caps to be eased amid native authority funding disaster

Native authorities can have the cap on the extent of council tax rises eased as a rising variety of them wrestle to stay financially viable within the face of hovering inflation and rising demand for providers.

Chancellor Jeremy Hunt will use the Autumn Assertion on Thursday to offer native authorities the appropriate to lift council tax by a most of 4.99 per cent from 2.99 per cent earlier than having to place the rise to a neighborhood referendum, in accordance with folks aware of the plan. This would come with a 1 per cent levy for social care.

Money-strapped native authorities, already hit by a 37 per cent minimize in central authorities grants since austerity measures had been launched in 2010, are more and more struggling within the high-inflation setting.

If taken up in full by native authorities, a 4.99 per cent rise would enhance the typical invoice for a typical household residence, coated by council tax band D, to greater than £2,000, exacerbating the price of residing disaster for tens of millions of households.

However the Native Authorities Affiliation warned that the size of funding gaps confronted by councils is just too massive to be plugged by council tax will increase. It mentioned if councils had been to make use of tax-raising powers alone they would want to push by way of a 20 per cent enhance over the subsequent two years, which was neither “fascinating nor sustainable”.

“Whereas council tax is a vital funding stream, it has by no means been the answer to the long-term pressures going through councils,” mentioned James Jamieson, chair of the LGA, warning that the monetary sustainability of native providers was now on a “cliff edge”.

The complete rise in council taxes, if taken up by three-quarters of all councils, would increase round £2bn by 2026, mentioned Phil Woolley, head of public sector consulting at Grant Thornton, the enterprise and monetary advisers, however this is able to nonetheless depart an total financing hole of £5.3bn to £7bn in 4 years’ time.

The Treasury declined to touch upon what it referred to as “funds hypothesis.” The Autumn Assertion is predicted to herald sweeping tax will increase and cuts to public expenditure because the chancellor seeks to fill what officers have described as an “eye-watering fiscal black gap”.

The anticipated leisure of the principles to permit councils to push by way of an increase of just below 5 per cent would additionally deepen regional inequality as councils overlaying extra prosperous areas would increase extra.

The chief of Manchester metropolis council, Bev Craig, mentioned each 1 proportion level rise she pushed by way of would increase £2mn, in comparison with £7mn in Kent, making the federal government’s plans “unsustainable and unfair”.

Jamieson agreed, including: “It’s clear that the federal government must provide you with a long-term plan to handle this disaster. Inflation will not be going to come back down in a single day; reserves can solely be spent as soon as; a neighborhood service can’t be minimize twice.”

In a letter to prime minister Rishi Sunak, the leaders of two of the nation’s largest Tory-run councils, Kent and Hampshire, underscored the gravity of the disaster. Each councils had been “going through funds deficits over the subsequent few years of a scale that has by no means been seen earlier than”, Kent’s Roger Gough and Hampshire’s Rob Humby warned.

With out “instant assist and a transparent plan for long run monetary sustainability” they had been prone to provoke part 114 notices, successfully declaring chapter, “throughout the subsequent yr or so”, they mentioned.

“The issue is easy: the extra cash that we will increase from council tax and enterprise charges barely covers the traditional inflationary pressures that we face annually.”

Analysis by Grant Thornton final month discovered that one in six English councils will run out of cash subsequent yr with out further earnings or additional funds cuts.

Extra reporting by Jasmine Cameron-Chileshe and Jennifer Williams