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Settlement: council tax 1% branded inadequate

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Leading local government figures have criticised the communities secretary’s decision to allow councils to raise council tax by a further 1% without a referendum in 2018-19, claiming it fails to address long-term funding pressures.

Delivering the provisional local government finance settlement today, Sajid Javid said the new flexibility “strikes a balance” between easing pressures on council services and limiting the impact on “hardworking taxpayers”.

He said the requirement for a referendum if core council tax is set above 6% in 2018-19 is an important “check and balance” against “excessive increases under the last Labour government”.

The Local Government Association has calculated the extra 1% will generate £250m of additional income, while LGC analysis has found £220m will go to upper tier councils. 

Local Government Association chair Lord Porter (Con) said while the option to raise council tax will offset some funding pressures, further flexibility should have been granted.

He added: “With no other national tax subject to referenda, the council tax referendum limit needs to be abolished so councils and their communities can decide how under-pressure local services are paid for, with residents able to democratically hold their council to account through the ballot box.”

Lord Porter told LGC that complete flexibility in council tax would not go far enough to alleviate funding pressures as councils with larger council tax bases could raise more money than those in areas with lower property prices.

President of the Society of Local Authority Chief Executives & Senior Managers Jo Miller said the government’s ongoing reliance on the social care precept, currently set at a maximum rise of 6% over three years, was of “grave concern”.

She added: “It does not provide any kind of long term fix and only seeks to further distort an already regressive tax mechanism.”

Chair of the County Council’s network Paul Carter (Con) said he was disappointed transitional grants had not been extended, adding the loss of £292m of transitional funding counties received over the past two years “exacerbates the precarious position of rural county services”.

He added: “Increasing council tax by an additional 1% could allow areas to raise some limited additional resource, but this is not a substitute for genuinely new funding and will further increase council tax burdens faced by county residents who already pay significantly more than other parts of the country.”

President of the Association of Directors of Adult Social Services Margaret Willcox said the provisional settlement was a “further blow” after social care, which is facing an estimated £2.3bn funding gap by 2020, was not mentioned in last month’s budget.

She added: “Allowing councils to increase council tax by 1% next year is woefully inadequate to address the funding gap facing adult social care, raises least funding in the areas of greatest need and is not the best solution to address the impending crisis facing the sector.”

President of the Association of Directors of Children’s Services Alison Michalska said the provisional settlement “failed to heed” warnings of an expected £2bn funding gap in children’s services by 2020.

She added: “The decision not to invest any additional new money in our children and young people, instead giving councils the ability to increase their core council tax by an additional 1% is just a drop in the ocean and will only disenfranchise disadvantaged communities even further, doing nothing to further the government’s social mobility agenda.”

How much will the 1% council tax raise?

Freedom to increase regular council tax by an additional 1% in 2018-19 will raise less than £220m for upper tier councils, LGC analysis has found.

The freedom means upper-tier councils will be able to put up council tax by a maximum of 5.99% next year without being required to hold a referendum, made up of a 3% precept to fund social care and 2.99% increase to core council tax.

However, the amount a council can raise as a result of the 1% varies significantly. At £6.6m Surrey CC is able to raise 18 times more than Hartlepool BC, at £365,000, despite a 12-fold difference in the population.

If all councils implemented the increase, it would mean a 0.7% average increase in net revenue budgets for county councils and just 0.4% for inner London boroughs, reflecting existing imbalances in how much council tax residents pay.

The picture for England’s 201 district councils is more complicated as 88 of them already have the freedom to increase council tax by whichever is the greatest of 2% or £5. The Local Government Association has calculated that is all eligible councils make use of the 1% freedom it would raise £250m more than could have been generated otherwise.

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Readers' comments (1)

  • Cllr Neil Blake

    Balancing budgets is not only about generating more income from Council Tax or increased grants. Making the provision of our services more efficient and cost effective, particularly through the use of digital technology, could generate savings that far outweigh those sources of income. Aylesbury Vale District Council has gone down that road and we’re looking at a balanced budget for each of the next four years. Happy to share what we’ve done with any LA that’s brave enough to want to follow in our footsteps.

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