Labour’s election manifesto included a promise that the party would “not increase taxes on working people” but Rachel Reeves has quietly overseen a £1.1billion tax bombshell that will hit almost everyone.
Under her watch, council tax bills are soaring.
You might ask why this is her fault. After all, aren’t council tax increases set by councillors?
In theory, yes. But in practice, authorities are forced to ask local taxpayers to help pay for essential services such as helping homeless families or protecting children in need, which they are obliged by law to provide.
And this year they need more money than ever before, because of the Chancellor’s decision to push up National Insurance.
Attention has focused on the impact this tax hike will have on businesses. It makes it more expensive for them to employ staff, and employers have warned they will have to cut back on overtime, limit wage increases and in some cases cut employee numbers as a result.
But public services are also affected, and that includes your local council.
The impact was set out by the former leader of Bradford Council Ellen Eaton, who is now vice-president of the Local Government Association which represents councils across the country. She’s also a member of the House of Lords, where she told Government Ministers: “With Labour’s increase in employer national insurance contributions, Local Government Association analysis confirms that the cost to local government will be around £1.7 billion next year.”
The Chancellor has promised to give councils some of this money back, she said. But Conservative peer Lady Eaton warned: “The provisional local government finance settlement confirms that councils will be compensated to the tune of £515 million for 2025-26, well short of the £1.7 billion.”
That leaves a shortfall of close to £1.2billion, which councils have to find from somewhere.
Local Government Minister Baroness Taylor responded on behalf of the Government, but was unable to explain where the cash would come from.
But we know where. Authorities across the country are planning inflation-busting council tax increases.
Windsor and Maidenhead, where Band D council tax including precepts is already £1,333, wants a 25% rise. Hampshire, where band D tax is £1,533, wants a £15% rise. So does North Somerset, where the Band D tax is already a whopping £1,800, and Bradford, where it is £1,726.
Newham wants a 10% rise while Cheshire East and Birmingham both want rises of 9.99% and Slough wants a rise of 7.99%.
Authorities are actually banned from increasing council tax by more than 5% without holding a referendum of local voters, which none of them want to do because they know they would lose. However, they can ask Local Government Secretary Angela Rayner for special permission to hike up taxes without a referendum, which is what they have done – causing a headache for Ms Rayney, who knows that authorities need the money.
It remains to be seen if more councils will seek to break the 5% limit. But the rest will push up council tax by the full 5%, even though inflation is only 2.5%.
In fairness, council tax has been shooting up faster than inflation for many years. But the Chancellor’s Budget has made the increases more certain, and even higher. And it’s most definitely working people that will have to pay.
