Local government warns that a council tax increase will fail to bridge the fiscal gap

Millions of people face a bigger jump in council tax bills next year as a result of an announcement in the autumn manifesto – but local authorities have warned this will not close a looming gap in local government finances.

Labor accused Jeremy Hunt of seeking to make councils “take the blame” for a new round of austerity after the chancellor gave permission for the authorities to raise council tax faster.

So far councils have been prevented from increasing the annual council tax by more than 2.99 percent without a local referendum.

However, Hunt gave the green light to local authorities to automatically raise the tax – which is paid according to the size of the house – up to 4.99 per cent.

Shadow chancellor Rachel Reeves said the government was “forcing” councils to raise council tax, with a typical D band family home now paying more than £2,000 a year for the first time.

“Local people… will have to pay more for the devastation the Tories have wreaked on our economy at a time when councils are already in dire straits for lack of support from the central government.”

“Now, they may have sat around their Downing Street table, thinking that this was a clever trick: to make the councils take the blame.”

James Jamieson, chair of the Local Government Association, said the policy would not on its own solve “the long-term pressures facing services – particularly high-demand services such as adult social care and child protection and homelessness prevention. It also raises different amounts of money in different parts of the country not It has something to do with need and adds to the financial burden that families face.”

In Salford, which is the 16th most deprived authority in the country, an increase of 5 per cent – instead of 3 per cent – would raise £2m, the city’s mayor, Paul Dennett, said. This compares to £14m in the wealthier county of Surrey.

Patrick Melia, chief financial officer at the Local Authority Chief Executives Association, warned that the mechanism was a “very inaccurate way” to raise revenue “that will raise widely varying amounts across the country”. “There are very few savings options left,” he added. “You can’t cut services twice.”

Tim Oliver, chair of the District Councils Network, added that planned funding growth cuts from 2025 could be “extremely difficult” for local services, which were already under enormous pressure.

“Unless the government tackles inflation next year, and the economy rebounds before 2025, the councils’ funding deficit will grow year on year and become unsustainable.”

Families faced a “terrifying obstacle course just to carry essentials” this winter, said Rebecca McDonald, chief economist at the Joseph Rowntree Foundation. “Raises in council, food and rent taxes appear to be insurmountable for large sections of the population,” she said.

Jonathan Carr-West, chief executive of the Local Government Information Unit, said the autumn statement provides “limited respite” for councils. “Well-run councils will fail unless something changes,” he said.

He added that allowing the authorities to raise the council tax is “a regressive tax that will hurt the poorest and shift political responsibility from the central government to the local government.”

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