Councils in Crisis: Maximum Tax Hikes Given Green Light Despite £600 Million Bail Out

Despite the government funding £600 million to councils across the UK, almost every council in the country is set to increase council tax by the maximum amount possible, adding up to an average cost of £103 per household.

Rising Council Tax

Local authorities are gearing up to impose the largest increase in council tax for a number of years, with an average rise of £103 on the horizon. 

Houses that fall under the Band D category could have their bills shoot up this year to the largest increase that the government allows in one sitting to relieve financial stress for councils.

It has been reported that some councils are facing financial difficulties and have been given the green light by the government to increase taxes by up to 10%. 

Government’s £600 Million Not Enough

Financial pressures continue to plague local authorities despite the government’s recent injection of £600 million to alleviate the stress.

Analysis conducted by the County Councils Network (CCN) indicates that all but eight of the 136 councils plan to implement the maximum allowable increase without resorting to a referendum.

A 4.99% increase in April is being aimed for by a staggering 94% of the 136 authorities that have disclosed their proposals.

The government has put restrictions in place that allow councils to increase council tax by up to 4.99% without the need for local referendums. Many councils are now taking advantage of this to cope with the financial pressures they are facing.

County Councils Network’s Perspective

According to CNN, last year, 75% of councils in the UK aimed for the maximum amount of increase possible, showing that financial pressures are still present despite the recent emergency injection.

8 local authorities declared bankruptcy in the 6 years leading up to 2024 via Section 114 notices. To make things worse, a recent survey by the Local Government Association showed more could follow.

Councils that are getting extra funding from the government are still planning to make savings of over £1 billion within the year, according to reports. 

Bankrupt Birmingham Worse Off

Residents of Birmingham are among the worst to be hit after it was revealed the city went bankrupt in 2023, meaning taxes will be hiked to alleviate the financial pressures.

It’s been reported that Birmingham Council is planning to cut a whopping £150 million from its budget, both in 2024-25 and 2025-26. 

Birmingham Council has come up with cost-cutting measures, such as dimming streetlights to save almost £1 million each year and reduce spending on highway maintenance, which can potentially save up to £12 million.

600 Jobs Lost, Children’s Services Cut

It’s been reported that up to 600 jobs are at risk as Birmingham City Council, the second-largest city in the UK, copes with the aftermath of declaring bankruptcy last year.

CNN Vice Chair Sam Corcoran urged the government to take action, arguing that “The next government must set out a long-term funding plan for councils.”

Corcoran insisted that councils don’t take “the decision to raise council tax lightly,” but they have had “little choice but to put up council tax due to the increased demands, particularly in children’s services.

Government Acknowledge Challenges

A government spokesperson claimed the government “recognizes” the current council tax crisis but insists they are doing all they can since they gave £600 million in funding, “that is why we recently announced an additional £600m support package for councils across England,” they said.

Rachal Fagan of the GMB Union in Birmingham slammed the government’s response, “We need to see urgent central government intervention on the equal pay crisis but instead, they’re trying to pass the cost onto ordinary Brummies.”

Fagan predicts the fate of Brummies will spread across the country unless more funding is given from the government to councils, insisting that the bankrupt city will be “a tragically familiar story across the country.” 

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Featured Image Credit: Shutterstock / William Barton.

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