“Double-whammy” tax hike warning as BBC finds council tax set to increase in many areas of England.
Families are facing a “double-whammy” of rising bills next year, as council tax across much of England is set to increase at the same time as National Insurance, according to BBC research.
Two-thirds of councils in England that responded to a BBC survey said they were considering a rise in council tax to help fund services.
Many other councils said they were unable to rule it out.
Working households face an increase in National Insurance from next April.
The increase is to help pay for health and social care, but with the bulk of the money initially due to go to the NHS, many council leaders have told the BBC they will still face funding shortfalls and so council tax increases are inevitable.
The Local Government Association said it could leave hard-pressed residents feeling that they are “shelling-out twice” for social care services.
The BBC contacted 152 councils in England that are responsible for social care and 121 responded, with two-thirds saying they are considering a tax rise from next April.
Final decisions will be taken after councils get more detail about the funding they will receive from government, which is expected next week.
Lisa Nandy, shadow secretary of state for Levelling Up, Housing and Communities, said: “It will be the communities the government promised to ‘level-up’ who will be hit hardest – in towns and villages across the country, with older populations where people are already struggling to make ends meet.
“Instead of delivering for people in these communities, the government’s ‘double whammy’ National Insurance and council tax will leave people worse off.”
Ministers are likely to confirm councils can increase tax by 2%, with an additional 1% allowed for the councils which have responsibility for social care.
What that means for household bills will differ from place to place, but the Institute for Fiscal Studies (IFS) has calculated that a 2.8% rise would add an average of around £40 to household bills from next April.
That is less than in recent years and will mean council tax won’t rise as fast as some other household bills, but the IFS says it comes after many years of above-inflation increases.
Research Economist Kate Ogden said: “The biggest uncertainty for budgets next year is probably the impact of Covid which will continue to mean falls in incomes and significant spending by councils on the public health response.
“Councils are being allowed a smaller council tax rise than they have been allowed in recent years, but they’ve also been promised lots of extra funding from government.
“It’s hard to say whether this will be enough, although we can expect to see many councils put up their council tax bills in an attempt to stem the gap.”
Image source, Getty Images
Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance (NI) from April 2022.
But from April 2023, National Insurance will return to its current rate, and the extra tax will be collected as a new Health and Social Care Levy.
The government says the changes are expected to raise £12bn a year, which will go initially towards easing pressure on the NHS.
A proportion will then be moved into social care system over the next three years.
The Local Government Association said councils were acutely aware of the burden tax increases placed on households, but many were facing tough choices about how to raise funds.
Councillor Shaun Davies, chair of the Local Government Association’s Resources Board, said: “In recent years, the government has relied on council tax raising powers to increase councils’ core spending power.
“While council tax is an important funding stream, it has never been the solution to the long-term pressures facing our local services, raising different amounts in different parts of the country, which is not related to need.
“Increasing council tax to pay for social care is a double whammy for hard-pressed residents, who may also feel they are shelling out twice for a service now that the Health and Social Care Levy is being introduced.”
Some council leaders in the north of England say relying on council tax for funding leaves them at a disadvantage because they can raise less than councils in part of the south.
Paul Dennett, Labour Mayor of Salford, said: “Different parts of the country can raise more money through council tax because they have properties that are in higher council tax bands paying more in council tax, but also different parts of the country have different demands on services.
“Salford is the 18th most deprived area in the country, and as a consequence of that the demand for public services is higher in places like Salford than it is in other parts of the country.”
The government said councils are responsible for setting tax levels, and local people have the ability to veto excessive rises through referendums.
A spokesman said: “We are committed to reforming health and social care and are investing an additional £5.4bn over three years, with £1bn allocated, to improve the lives of those who receive care.
“We are also providing an additional £1.6bn in core local government funding in each year of the next Spending Review, which will allow councils to increase their spending on vital public services, such as Children’s and Adults Social Care, to ensure they respond effectively to rising demand.”
The leaders of England’s largest councils – many of which are Tory-led – have warned that even with extra funding from government they are still facing a shortfall of over £500m next year and so will have to “reluctantly” raise council tax to keep services running.
Cllr Tim Oliver, chairman of the County Councils Network and Conservative leader of Surrey County Council, said that many councils will face a gap in their finances.
“We recognise that our residents will be feeling the pinch after a tough 18 months with the cost of living rising, whilst some may be facing uncertain employment prospects,” he said.
“County residents already pay the highest rates and those county leaders that do propose rises of the maximum permitted will be doing so as they have little choice other than to substantively reduce local services.”