Britons already battling the highest tax burden on record are set to be clobbered by even higher council tax rates from April, according to new reports.
The Department for Local Government has told council chiefs they expect the maximum possible increase of 4.99 percent to hit voters pay packets from April, despite the ongoing cost of living crisis.
Such a move would pocket a whopping £2billion for councils, with the average band D property forced to stump up an extra £100 a year.
The warning comes amid an increasing number of councils declaring themselves effectively bankrupt.
Seven councils have issued so-called Section 114 notices since 2018, leading to a freeze in all non-statutory spending.
Northamptonshire County Council were the first local authority to do so for 20 years, however were swiftly followed by Slough, Croydon, Thurrock, Woking, Birmingham and Nottingham, with Middlesbrough on the brink of following suit.
Polling by the New Statesman this year revealed one in four councillors believe their authority will soon go bankrupt.
This morning the IFS warns that such hikes to council tax will hurt the poorest households the most, as it forms a larger share of their monthly outgoings than wealthier families.
David Phillips, an economist at the IFS, told the Guardian: “Increasing council tax while cutting most direct taxes – for example, national insurance, income tax and especially capital gains tax and inheritance tax – would be regressive”.
Following pressure from Tory MPs, last week Michael Gove announced an extra £600 million for local government funding.
Mr Gove told MPs: “Taking into account this new funding, local government in England will see an increase in core spending power of up to £4.5billion next year, or 7.5 percent in cash terms, an above-inflation increase, rising from £60.2billion in 2023-24 to up to £64.7billion.”
However the 7.5 percent increase is based on a departmental assumption that every local authority will apply the maximum council tax increase this year.
Without such an increase, the new Government funding represents a rise of just four percent, in line with inflation.
The Conservative leader of Kent County Council, Roger Gough, said: “That spending power means us taxing the residents of Kent more. Or at least the government’s expectations are based on that.”
The Institute for Government has suggested the burden of council income has shifted away from central government funding since 2010, with councils now raising around 30 percent more from council tax.
The leader of Leeds city council said Westminster’s funding of their budget has fallen from 36 percent a decade ago to around 5 percent today.
Tory MP Ben Bradley, who also serves as leader of Nottinghamshire County Council, welcomed Mr Gove’s recent funding boost, but warned forthcoming tax cuts by Jeremy Hunt could be undermined by increases in local council tax.
“There’s almost no point chopping £100 off tax bills nationally if you’re adding on to it with council tax. There is support out there and polling that people are keen to see investment in public services as a priority. There is scope to do both.”
There are also significant problems with how council tax is levied, being based on property evaluations from 1991.
This has led to the absurd situation where someone living in a £150,000 house in Hartlepool pays more than £200 a year more in council tax than someone living in an £8 million mansion in Westminster.
