Council tax rise: Town halls given power to raise level by £100 as Conservatives warn of impact on poor

Levy 'falls very heavily on those with fixed incomes,' warns Jacob Rees-Mogg

Sajid Javid, Communities and Local Government Secretary, sought to justify the new move – which The Taxpayers’ Alliance said ‘beggars belief’ (PA)

Local authorities are to be allowed to raise council tax by up to 5.99 per cent next year, after a further relaxation of the Government-imposed cap to address shortfalls in funding for social care.

It would see owners of typical Band D properties paying some £95 extra per year, and also prompted warnings by Conservative MPs that people on low or fixed incomes could be hit hard.

Despite the potential for greater revenue, the Conservative head of the Local Government Association (LGA) warned councils faced a near-£6bn funding black hole by 2020 due to Government cuts that put vital services at risk.

In his provisional local government funding settlement for 2018/19, Communities Secretary Sajid Javid announced that the threshold for triggering an automatic local referendum was being increased from 2 per cent to 3 per cent of core council tax.

Coupled with the 3 per cent additional “precept” permitted to authorities with social care responsibilities, this gives councils freedom to hike bills by up to 5.99 per cent next April without seeking voters’ approval.

Conservative MP Bob Blackman told MailOnline: “It is not a happy Christmas message to see for hard-pressed council tax payers. It hits people who are on low incomes.

“The problem with the council tax rises is it’s very difficult for local authorities to plead poverty if they don’t increase their council tax.”

Councils have faced repeated reductions in the funding allocated by central government in recent years and, as well as slashing back-room staff and services, have used increased taxes to preserve key functions.

Jacob Rees-Mogg told The Daily Telegraph: “I am concerned that tax as a percentage of GDP is up to the highest level since the 1970s. Council tax falls very heavily on those with fixed incomes.”

LGA chairman Lord Porter warned that councils were approaching “a financial breaking point which will threaten the existence of some local services”.

“Years of unprecedented central government funding cuts have left many councils beyond the point where council tax income can be expected to plug the growing funding gaps they face,” said the Conservative peer. “Local government faces an overall funding gap of £5.8bn by 2020.”

Calling for the abolition of the referendum trigger, Lord Porter said: “While some councils will receive extra funding next year, the Government needs to provide new funding for all councils over the next few years so they can protect vital local services from further cutbacks.”

Social care service leaders branded the move “woefully inadequate”. The average level of council tax on a Band D property in 2017/18 was £1,591, according to government documents. A 5.99 per cent rise next year would make it £1,686.30.

Mr Javid told the House of Commons it would give local authorities “the independence they need to help relieve pressure on local services”, while “recognising the need to keep spending under control”.

He also announced the rollout of a pilot under which 10 councils – Berkshire, Derbyshire, Devon, Gloucestershire, Kent & Medway, Leeds, Lincolnshire, Solent, Suffolk and Surrey – will be allowed to retain 100 per cent of business rates raised locally, along with new powers for Police and Crime Commissioners to raise council tax – meaning another £12 hike on top of the average bill.

But his Labour Shadow Andrew Gwynne denounced the package as “piecemeal”, warning that ministers had failed to set out a “sustainable plan” for the future of social care.

And the president of the Association of Directors of Adult Social Services, Margaret Willcox, described it as “a further blow” for the sector as it awaits longer-term proposals to resolve its funding crisis in a consultative Green Paper promised for next summer.

The councils with highest levels of disability were likely to benefit least from the additional 1 per cent permitted hike, as they tend to be in disadvantaged areas where the tax base is low, she said.

“Allowing councils to increase council tax by 1 per cent next year is woefully inadequate to address the funding gap facing adult social care, raises least funding in the areas of greatest need and is not the best solution to address the impending crisis facing the sector,” warned Ms Willcox.

“With no fresh funding injection, an increasing number of older and disabled people will not get the care and support they desperately need.

“By the end of this financial year, £6bn will have been cut from councils’ adult social care budgets since 2010 – with need for our services growing all that time.”

And the co-chair of the Care and Support Alliance, Caroline Abrahams, said that the settlement would spark “real and mounting concern” about the prospects for older and disabled people in 2018.

“Without an urgent injection of cash, we worry that more care providers and care workers will quit and that the search for good, affordable care will become even more desperate in many areas than it already is,” said Ms Abrahams.

The TaxPayers’ Alliance (TPA) pressure group said it “beggars belief” that Mr Javid was allowing council tax to rise more quickly at a time of below-inflation pay rises.

TPA chief executive John O’Connell said: “With wage growth stagnating and the cost of living on the rise, it beggars belief that politicians are asking for powers to take even more of people’s hard-earned money.

“Council tax has already nearly doubled in the last decade so it isn’t fair to ask residents to plug the gaps in their finances, especially when we know that council tax already hits the poorest hardest. Councils should instead continue to root out waste and scrap any item of spending that does not help provide an essential service.”

A DCLG spokesman said: “This settlement strikes a balance between giving councils the ability to make decisions to meet pressures and ensure that our most vulnerable in society get the support they need while protecting residents against excessive council tax bill rises.”