Ann McGauran 06 October 2021

Council tax could easily rise by 5% a year warn finance experts

Council tax could easily rise by 5% a year warn finance experts image

English councils will need billlions more from government and big tax rises to maintain services and pay for social care reforms, says new analysis published today by the Institute for Fiscal Studies (IFS).

According to the IFS, under current spending plans council tax rises of 3.6% will be required for the next three years just to ensure councils provide the same range and quality of services in 2024-25 as they did before COVID-19. 

However, it highlighted that bigger increases in underlying demand and cost pressures for top-ups to other budgets such as schools, which eat into the amount available for grants to councils, 'could easily push up the necessary council tax rises to 5% a year, or by over £220 by 2024-25'.

In addition, the analysis published as a pre-released chapter of the 2021 IFS Green Budget, concluded that the Government's ambitions for social care are underfunded and are likely to cost £5bn a year in the longer term - almost three times the additional annual funding currently allocated over the next three years. 

David Phillips, an associate director at IFS, said: 'The recently announced social care reforms pose major challenges for councils across England. The funding announced by government so far is unlikely to be enough to meet all of its objectives, in either the short or longer term.

'Without sufficient funding, councils may find themselves having to tighten the care needs assessments further in order to pay for the care cost cap and more generous means-testing arrangements. That would see some poorer people who would now be eligible losing access to council-funded care, so that coverage can be extended to other, typically financially better-off, people.'

The Local Government Association (LGA) last week warned council tax will have to rise by more than a quarter in the next three years to cover the shortfall in funding for services.

Responding to the IFS's analysis, chair of the LGA Cllr James Jamieson said: 'The significant financial pressures facing local services cannot be met by council tax income alone. Councils are particularly alarmed that the Government’s solution for tackling social care’s core existing pressures appears to be solely through the use of council tax, and the social care precept.'

Responding to the LGA's warning of a rise in council tax, a government spokesperson said: ‘The Spending Review will continue to focus on supporting jobs and delivering the public’s key priorities.’

David Phillips tells The MJ that the Spending Review cannot bring councils funding certainty but it can bring clarity.

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