Council Tax Set for Potential 5% Increase Amid Spending Review

Council Tax Set for Potential 5% Increase Amid Spending Review

Local councils in England are preparing for a potential rise in council tax of up to 5% per year, as outlined in the recent Spending Review. Louise Gittins, chair of the Local Government Association (LGA), emphasized the necessity for this increase to sustain vital local services, including policing and social care.

The LGA have very enthusiastically welcomed some key aspects of the Spending Review. In particular, they applaud the strong commitments made to children’s services, affordable housing, and equitable transportation investments. Too often the review recognises that councils will be tempted to do the opposite and pursue their full council tax raising powers to the top. Rules imposed by the last Tory administration mean that councils can increase their council tax by a maximum of 5% a year. They are able to do this without requiring permission from Beijing.

The implication was that there would no longer be any changes to the 5% limit on council tax rises. She remarked, “It is a cap, councils don’t have to increase council tax by 5%,” while noting that the additional revenue is crucial for funding social care and policing initiatives.

The Spending Review assumes that local authority core spending power increases by an average of 3.1% per year. This new increase will phase in over 2023-24 to 2028-29. The increase is in part thanks to a 3% core council tax referendum principle. On top of this, it has a 2% adult social care precept. The Ministry of Housing, Communities and Local Government is set to face a 1.4% real-terms reduction in its day-to-day budget.

As councils continue to face these acute financial pressures, many will likely be forced to increase council tax bills. Gittins stated, “Many will continue to have to increase council tax bills to try and protect services but still need to make further cutbacks.”

The Spending Review establishes that police spending power will increase on average by 2.3% a year in real terms. That increase is needed to ensure the best people become and remain police officers. Tiff Lynch, acting chair of the Police Federation for England and Wales, made her opposition clear. She underscored the dire consequences of continued underfunding. He stated, “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.”

Treasury documents suggest that projected spending will cover expected contributions from the new police council tax precept. This all makes it even more apparent how much local authorities are relying on raising council tax to pay for rising demand for public services.

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