Households face council tax hit ‘worthy of Maradona’
Sleight of hand behind £70 increase in bills is ‘perfect tribute’ to late footballer, says think tank
HOUSEHOLDS across the UK face a £70 hit next year from higher council tax bills, the Institute for Fiscal Studies has warned.
The think tank’s analysis of this week’s spending review highlighted that Rishi Sunak, the Chancellor, had chosen to cut support to local authorities and given them the ability to raise council tax by 5 per cent instead.
Paul Johnson, the IFS director, said: “That will increase annual tax bills by an average of around £70 per household.”
Funding for councils will rise by £2.2 billion next year but three quarters of the funding will come from the 2 per cent rise in tax that councils can levy without a referendum, as well as a 3 per cent increase for social care.
Ben Zaranko, IFS analyst, said Mr Sunak was displaying “sleight of hand” worthy of Argentine footballer Diego Maradona – the scorer of the notorious “Hand of God” goal who died this week – with the “roundabout” increase.
“A move that will leave millions of English households disappointed and potentially angry is maybe the perfect tribute to the late, great Diego Maradona,” Mr Zaranko said.
The tax threat comes as the economy faces its worst year in more than 300 years, with an 11.3 per cent slump – the biggest since the Great Frost of 1709.
The IFS added that the Conservatives will also come under pressure to break manifesto pledges not to raise tax as the Chancellor faces a bigger than expected £40 billion black hole in the public finances due to Covid-19.
Its experts said borrowing could be higher than the Office for Budget Responsibility’s “relatively benign” scenario if the virus forces Mr Sunak to spend more on the NHS beyond next year, or extend the £20 extra a week in Universal Credit payments beyond March at a cost of £7 billion.
Under the OBR’S base case the Treasury will need to raise £20 billion by 2025 to balance day-to-day spending with tax revenues.
However, Carl Emmerson, IFS deputy director, warned that “it doesn’t take very much to end up with a number twice that big”.
“The obvious thing to do is to push up the standard rates of income tax or national insurance or VAT, and indeed if we look at past fiscal consolidations that involve tax rises under Labour, Coalition and Conservative governments, it has often been the rate of national
insurance, or VAT they have reached for,” he said. “I appreciate it would break a Conservative Party manifesto commitment but … clearly Covid is a very, very big shock that wasn’t anticipated last year.”
The Conservatives pledged in 2019 not to raise VAT, income tax or national insurance. But Mr Emmerson added that post-crisis spending as a share of GDP was likely to settle at about 42pc, “a higher level than what we’ve been used to in our history”.
Mr Sunak has stressed that the scale of the UK’S borrowing, forecast to hit a peacetime record of £394 billion this year, was “not sustainable”.
Mr Johnson said the decision to freeze public sector pay for some would probably save only up to £2 billion a year at the most. “The Chancellor has perhaps picked a big fight over not very much money,” he added.