The Telegraph

Councils to raise £7.5bn in stealth tax raid after Rishi Sunak relaxes threshold for local vote

Householders face a £7.5 billion council tax raid after local authorities increased rates without consultation, according to an analysis by the Office for Budget Responsibility. The OBR said councils would increase taxes by £1.8 billion next month – up to £100 a year for many households – after the Government allowed them to impose increases of up to 5 per cent. This could culminate in an increase of £7.5 billion by 2025-26. Councils can normally raise local taxes by no more than 2 per cent without a referendum. But the Chancellor increased the limit to 5 per cent in his November review to help meet councils’ ballooning social care costs. The OBR’s estimates suggest two-thirds of councils will raise taxes up to the maximum 4.99 per cent, meaning increases of between £50 and £100 for band D properties. The OBR said the Chancellor’s decision had forced it to revise up its estimate of the increase in council tax by £800 million to £1.8 billion for 2021-22. “This is more than explained by the Government’s decision to allow councils to increase council tax rates by up to 5 per cent … rather than the 2 per cent our March 2020 forecast assumed,” said the OBR in its Budget day report. It pushes the total council tax take for 2021/22 to £39.9 billion, rising to £45.6 billion by 2025/26. Local tax campaigners said it was a “stealth” tax that would undermine Boris Johnson’s levelling up agenda, while senior Tories, fiscal experts and council leaders blamed the Government’s failure to solve the social care crisis for the increased bills. Andrew Dixon, founder of the Fairer Share campaign for property tax reform, said: “This … will only exacerbate the unfairness of the current system where modest homes in the North often pay significantly more than mansions in Knightsbridge. It is sure to sit awkwardly with voters inspired by the Conservatives’ talk of fairness and levelling up. Council tax was the elephant in the room when the Chancellor delivered the Budget. “While he set out support packages for those worst hit by Covid-19, there was no such respite for millions of modest and low-income households facing crippling council tax bills.” Stuart Adam, of the Institute for Fiscal Studies, said: “It is a way to allow councils to raise more for social care in the short term while the Government sorts out some more fundamental solutions for the long-term funding of social care. It was one of the things that the Budget was silent about.” Lord Lilley, a former social security secretary, who will publish his own blueprint for social reform next week, said: “Because the Government has been unable to decide how to reform finance of social care, it has left council taxpayers to take the strain. “Councils’ care budgets have been squeezed to the limit. The proportion of people over 85 living in care homes has shrunk from 25 per cent to 15 per cent and can’t go much lower.” The Local Government Association said: “Councils face the tough choice about whether to increase bills to bring in desperately needed funding to protect our services at a time when we are acutely aware of the significant burden that this could place on some households. “Council tax rises – particularly the adult social care precept – have never been the solution to the long-term pressures faced by councils, particularly in social care, which is desperately in need of reform. “Further action is desperately needed to immediately shore up social care services – which have been on the front line during the pandemic – and to secure the long-term future of care and support. “The Government must urgently bring forward its proposals.” ‘Crippling’ bills About a quarter of councils that provide social care will issue a council tax bill to Band D homes of more than £2,000 in April, most for the first time. And in more than two thirds of areas, bills for a Band D home will rise by at least £50. In London, householders will be hit by a 9.5 per cent rise in the portion of council tax charged by the Greater London Authority – an extra £31.59 for a Band D home. The combined rises mean Band D bills look set to rise by more than £100 this year in around seven of London’s 32 boroughs. A spokesman for the Ministry of Housing, Communities and Local Government said: “We’ve committed over £35 billion to help councils support their communities and local businesses during the pandemic. “We’re also providing councils with £670 million of new grant funding to enable them to continue reducing council tax bills next year for those least able to pay, including households financially hard-hit by the pandemic. “Councils are and have always been responsible for setting council tax levels. We set referendum principles to ensure that local people have the final say over any excessive increases.”



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