Council tax could rise by more than £100 next year - what it means for households

Thursday, 26th November 2020, 12:29 pm
Updated Thursday, 26th November 2020, 12:30 pm

The average price of council tax could rise next year by up to five per cent as it is revealed that councils have permission to raise taxes.

As the Chancellor uses the increase to pay for police and social care, the average price of council tax will rise by £109.

The announcement can be found within the Chancellor Rishi Sunak’s Spending Review 2020, which reveals that the Treasury has granted local authorities the power to raise council tax prices if they decide to.

The document states that “local authorities will be able to increase their council tax bills by two per cent without needing to hold a referendum, and social care authorities will be able to charge an additional three per cent precept to help fund pressures in social care”.

If local authorities wish to go above the two per cent increase, a referendum will need to be held.

The spending review states that the spending review “supports local authorities through increasing care spending power by an estimated 4.5 per cent in cash terms next year, which follows the largest real terms increase in core spending power for a decade at Spending Review 2019”.

‘Extra flexibility’

The Spending Review 2020 speech was delivered by Chancellor Rishi Sunak, where he said that the “immediate priority is to protect people’s lives and livelihoods”.

Sunak said: “Local authorities will have extra flexibility for Council Tax and Adult Social Care precept which together with £300 million of new grant funding gives them access to an extra billion pounds to fund social care.

“And this on top of the extra billion pound social care grant we provided this year, which I can confirm will be maintained into next year.”

‘Significant burden on households’

Responding to the Spending Review, Cllr James Jamieson, Chairman of the Local Government Association said: “Council services have been critical in the fight against COVID-19, protecting the most vulnerable, supporting our local businesses and keeping the country running.

“It is good that today’s Spending Review provides a potential increase of 4.5 per cent in council core spending power to support these vital local services. However, this assumes council tax bills will rise by 5 per cent next year which will place a significant burden on households.”

Jamieson goes on to say that this “is not the long-term solution which is desperately needed”.

“Overall, the Spending Review provides more certainty for councils next year but the long-term outlook remains unclear.

“Public finances will undoubtedly be under huge strain in the years ahead but investment in our local public services is critical to our national recovery next year and beyond,” Jamieson said.

Support for households that can’t afford council tax

The Spending Review 2020 states that to “support those on low incomes throughout the outbreak, the government has announced a package of temporary welfare measures in place until spring 2021”.

A £500 million hardship fund will be issued to local authorities, which the government expects them to use to discount the council tax bills of all working age local council tax support claimants by £150.

“This scheme provides funding for more than 3 million council tax discounts. Local authorities should use any remaining grant to support those most in need,” the Spending Review 2020 explains.