Council tax ‘cannot be the answer’ – counties call for Spending Review funding injection for local authorities

England’s largest councils say that council tax cannot be the sole answer to filling a multi-billion shortfall over the next three years – and they argue the Spending Review must provide local authorities with a substantial injection of funding to prevent major cuts to services.

A County Councils Network (CCN) analysis of the financial plans of its 36 member councils – which cover almost half of England’s population – finds those authorities face a £2.8bn funding shortfall over the next three years even if council tax bills rise by 1.99% every twelve months.

With the Treasury thought to be considering proposals to allow councils to levy higher council tax bills to address their shortfall without the need for a referendum, the CCN says that it would take yearly rises of up to 7.99% to almost eliminate their deficit as an alternative to major service cuts.

Increases on scale would add £392 onto an average county family’s bill over the next three years. But with the cost of living rising, council leaders say a cumulative rise of almost 24% in council tax would be ‘unacceptable and unfair to residents.

A rise of this scale would mean that the average Band D bill would be over £2,200 in every county area by 2025: averaging £2,386 per year. These figures were produced by CCN and Pixel Financial Management. 

Unless the Chancellor can provide a substantial injection of funding for local authorities over the next three years in this month’s Spending Review, county leaders say they face the unenviable decision of making major cuts services as an alternative to proposing heavy council tax rises.

Download CCN’s Spending Review submission here.

This could include tightening eligibility and raising fees in adult social care and reducing preventative services in children’s social care. Both adults and children’s social care is where county authorities are facing the most significant pressures.

CCN’s analysis, compiled by looking at the financial plans for all its member authorities, finds that their councils face £2.8bn funding shortfall over the next three years, even if council tax rose at 1.99% each year by 2025.

Those councils predict that the legacy of Coronavirus – such as increased demand in children’s services and higher costs in adult social care – will impact on their budgets in future years, on top of existing cost and demand pressures.

Councils must legally set a balanced budget every year and would therefore need to make major cuts to services or raise council tax by 7.99% each year to bridge the £2.8bn deficit unless the Treasury provides further grant funding.

Instead, it is widely reported that the Treasury is considering allowing local authorities to increase the social care precept element of council tax above the 2.99% limit to address the funding shortfalls facing councils.

Presently, the council tax bill for the average household in a county area is £1,994 – which is the highest in England and some £600 more than a typical Band D property in London. In total, 16 county areas already levy an average charge of over £2,000. An 7.99% rise over the next three years would see every county area levy a charge of at least £2,200 – with some rising as high as £2,680.

Cllr Carl Les, Finance Spokesperson for the County Councils Network, said:

“County local authorities face an extremely difficult three years coming up, with rising costs of delivering services, demographic pressures, and the legacy of Coronavirus meaning that we need to find savings or increased income of £2.8bn over the next years to balance our books.

“We are acutely aware that the cost of living is rising and that many households have suffered from the economic impact of the pandemic. Therefore, large-scale council tax rises to make up our funding shortfall would be unacceptable and unfair for hard-pressed residents. It would also be an unsustainable approach to funding services, raising variable amounts across the country.

“We appreciate the tight fiscal environment facing the Chancellor, but we are calling on the government to inject further funding into the system for local authorities over the next three years, in order to avoid a further round of large-scale reductions in services. The government’s levelling-up agenda must begin with making public services adequately funded.”

Notes to editor

• The numerical rise in council tax has been calculated by adding what a 7.99% increase to the county council or unitary council element of council tax (including the adult social care precept but excluding all other precepts such as police, fire, and district councils) would cost the average Band D household in county areas, which currently stands at £1,994. This rise is based over the financial years 2022-23, 2023-24, and 2024-25.