Nearly all councils are planning to raise council tax by the maximum amount permitted without holding a referendum, new analysis shows, amid a crisis in local authority funding.
All but eight of the 136 top-tier councils to have declared their proposals plan to hike council tax by at least 4.99 per cent in April, according to analysis by the County Councils Network (CCN).
And in some areas the jump will be even higher; four councils recently forced to declare effective bankruptcy – Birmingham, Woking, Slough and Thurrock – have been given special dispensation by the government to raise council tax by up to 10 per cent.
Thurrock has opted to raise its tax by 7.99 per cent, while Birmingham, Woking and Slough are among 17 councils yet to declare their tax plans for the financial year ahead.
The 95 per cent of councils found to be seeking to impose the maximum rise represents a significant rise from the 75 per cent of councils found to be planning to do so in research carried out at the same time last year, the CCN said.
The proposed increases overall mean the average Band D household will face an average increase of £103 over the next year.
The decisions to raise council tax bills are driven by the scale of the financial pressures authorities remain under, despite the government’s recent emergency injection of £600m, the CCN said.
In the last six years, eight local authorities have issued a section 114 notice, which is in effect a declaration of bankruptcy. Prior to 2018, the last time a council had been forced to do so was in 2000.
Experts fear more councils could soon follow, with a Local Government Association survey of council leaders finding in December that nearly one in five think it is very or fairly likely they will need to issue a section 114 notice either this year or next.
Sam Corcoran, Labour leader of Cheshire East Council and CCN vice-chair, said councils have to make “some of their toughest decisions” because of increased costs and spikes in demand for social care services.
He added that, while the additional funding provided by the government would make a tangible difference and protect services, the fragile state of council finances means council tax bills had to rise to ensure sustainability.
The CCN’s membership of 37 councils – which serve 47 per cent of the population in England – received £240m of the extra government funding for 2024/25. But they are planning in-year savings of more than £1bn.
Despite this, these councils are said to be still facing a collective funding gap of £1.1bn over the next two years.
More councils fear they could follow Birmingham into insolvency
(Jacob King/PA)
Mr Corcoran added: “No council leader takes the decision to raise council tax lightly as we know this will add to the cost of living for residents, but councils have had little choice but to put up council tax due to the increased demands, particularly in children’s services.
“The next government must set out a long-term funding plan for councils while also undertaking a comprehensive reform programme to help drive down costs, especially for children’s services and home-to-school transport.”
Some councils have agreed on the maximum council tax increase but plan to introduce measures to mitigate the impact on residents, such as making support-funding available to low-income households, according to the CCN.
The group has called on the next government to implement a “comprehensive” reform programme to drive down costs, including an overhaul of the legislative framework for school transport and action to reduce fees charged by private providers in the children’s social care market.
A government spokesperson said: “We recognise councils are facing challenges and that is why we recently announced an additional £600m support package for councils across England, increasing their overall funding for the upcoming financial year to £64.7b – a 7.5 per cent increase in cash terms.
“Councils are responsible for their own finances and set council tax levels, but we have been clear they should be mindful of cost-of-living pressures. We continue to protect taxpayers from excessive council tax increases through referendum principles.”
Additional reporting by PA