Council tax is anticipated to rise by an average of 5% annually as local authorities navigate funding challenges for essential services. Louise Gittins, chair of the Local Government Association, highlighted the mixed implications of the recent Spending Review, which aims to bolster children’s services, affordable housing, and transport investments.
The Local Government Association, which represents all of England’s councils — from the poorest to the richest — understands better than most blunt budget realities on the ground. Gittins was pleased to note that the Spending Review did contain “a few areas of welcome support.” Many councils will have to make the difficult decision to raise council tax bills just to continue running essential services.
In England, local authorities are allowed to raise council tax by a maximum of 5% per year. They are not required to receive this approval from the central government either. Gittins pointed out that some councils opt for smaller increases as they strive to balance budgets while addressing community needs.
“The Spending Review assumes councils will raise council tax to the maximum level,” Gittins stated, reflecting on the government’s expectations. Despite this, she emphasized that many councils may continue to face cutbacks even while raising taxes to protect essential services.
On the issue of council tax, Chancellor Rachel Reeves announced that the 5% cap on increases will remain. This is a policy that the previous administration put in place. She noted that local jurisdictions can choose to adopt the entire hike. These companies have no obligation to do so.
“It is a cap, councils don’t have to increase council tax by 5%,” – Chancellor Rachel Reeves
Apart from the widely expected council tax increases, funding for policing is the other big item in the Spending Review. The government’s own calculations estimate an average increase in “police spending power” of 2.3% a year in real terms. However, Tiff Lynch, the new interim chair of the Police Federation for England and Wales spoke in alarm at further cuts.
“This Spending Review should have been a turning point after 15 years of austerity that has left policing and police officers broken. Instead, the cuts will continue and it’s the public who will pay the price,” – Tiff Lynch
The Ministry of Housing, Communities and Local Government will still see a 1.4% real-terms cut to its day-to-day budget. This leaves yet another layer of complexity in the funding landscape for councils who are struggling to keep their local services funded.
Reeves recognized the Spending Review’s focus on delivering critical investments in social care and policing. He cautioned that councils could continue to find themselves in tough situations.
“That’s to invest in things like social care, but also as is normal to put money into policing,” – Chancellor Rachel Reeves