Householders face big increases in Council Tax bills over the next two years – at least – amid reports of a £6 billion black hole in funding, say local authorities.
Increases are needed to cope with the increasing demand for social care for the elderly and disabled as well as support services for children.
At the same time, many councils across the country are on the brink of bankruptcy, which will force punishing cuts to services without extra funding.
Jeremy Hunt’s Spring budget included small print figures showing the amount of money raised through Council Tax is set to rise from £46.9 billion this year to £57.5 billion by 2028-29 – a rise of £10.6 billion a year or almost 23 percent.
The Local Government Association (LGA) has produced a new White Paper which argues that councils will need a £6 billion increase in funding over the next two years alone.
Separately, a number of organisations, including the Institute for Fiscal Studies, is arguing that the way Council Tax is charged needs to be revolutionised to better reflect property prices.
The IFS favours modernising the system to ensure Council Tax is charged as a proportion of today’s valuation of each property, rather than relying on values that were set in 1991.
It argues that such a change would see owners of middle and lower-value homes pay less while the owners of the most expensive properties would pay more.
Such a change would also shift the nation’s Council Tax bill with a greater proportion of the burden shifting from properties in the north of England to the South.
The LGA’s White Paper includes a new analysis revealing that councils in England now face a funding gap of £6.2 billion over the next two years.
It said this is being driven by rising cost and demand pressures to provide adult social care, children’s services, homelessness support and home-to-school transport for children with special educational needs and disabilities.
Such pressures are increasingly leaving councils with less funding to provide universal local services that people rely on every day – such as keeping streets clean, filling potholes and tackling anti-social behaviour.
A recent LGA survey found two-thirds of councils have already had to make cutbacks to local neighbourhood services this year (2024/25) including waste collections, road repairs, library and leisure services – as they struggle to plug funding gaps.
The LGA is calling on all political parties to commit to a significant and sustained increase in funding for councils in the next Spending Review, alongside multi-year funding settlements for councils and plans to reform the local government finance system. This year saw the sixth one-year settlement in a row for councils.
Without this, the LGA is warning that cost and demand pressures will continue to stretch council budgets to the limit in the coming years, leaving more councils of all political colours and types unable to deliver their legal duties for their residents and putting vital services at further risk of cutbacks.
Other proposals in the Local Government White Paper include:
Giving councils and combined authorities the powers to build more affordable, good-quality homes at scale for people in the areas where they are needed, with five-year local housing deals for all areas of the country that want them, combining funding from multiple housing programmes into a single pot.
Reforming adult social care, ensuring it is adequately funded, with councils and the NHS working better together to support people in need, and a focus on prevention and recovery services, including support for the voluntary sector who are a crucial part of the adult social care system.
Reviewing early years education and childcare to ensure that the workforce has the right skills and training and ensuring early years entitlements are properly funded, with councils fully resourced to deliver their statutory duties.
Cllr Kevin Bentley, Senior Vice Chairman of the LGA, said: “We all rely on local government to keep our streets clean, collect our bins, fix our potholes, build more homes, create jobs, keep children safe and support people of all ages to live fulfilling lives.
“However, a funding gap facing local services of more than £6 billion over the next two years – fuelled by rising cost and demand pressures – means a chasm will continue to grow between what people and their communities need and want from their councils and what councils can deliver.
“On July 5, the next government will be faced with many challenges, whether it is building more affordable housing, improving care for adults and children, reducing homelessness, boosting inclusive growth or tackling climate change.
“Local government’s offer to the next government is huge. Respect us, trust us and fund us. By working together as equal partners, we can meet the fundamental long-term challenges facing our communities.”
David Phillips, an associate director at the IFS, said the way Council Tax currently operates means households in the north and Midlands often pay too much.
He said house values around the country have seen huge changes since 1991 “meaning that at least half are now effectively in the ‘wrong band’.
He added: “Households in the North and Midlands are often in too high a band – and pay too much – while those in London and its environs too low a band – and pay too little – compared to what they would under a modernised tax.”