Council tax bills to rise by £40 without the need for a referendum

A total of £6.6billion expected to be generated as local authorities get green light for 3pc increase

‘We are concerned that money allocated to social care from the Health and Care Levy will not be enough to fund reforms’

‘The £4.8bn for social care and the Health and Social Care Levy will paper over cracks. But it will not transform social care’

COUNCIL tax receipts could be £12.1billion higher in five years than they were at the turn of the decade, as local authorities grapple with the costs of Covid and rising social care bills.

The Office for Budget Responsibility yesterday said it expected revenues from the tax to be 33 per cent higher by 2026/27 than they were seven years earlier, equivalent to hundreds of pounds extra per household.

It came as the Chancellor yesterday confirmed that local authorities would still be able to increase council tax rates by 3 per cent a year, despite Boris Johnson announcing a £12 billion-a-year tax rise this year to pay for social care.

According to Treasury spending review documents, councils will be able to increase council tax by 2 per cent over the next three years without holding a local referendum.

Those with care responsibilities will also be able to raise an additional 1 per cent annually through the adult social care precept. However, the precept limit is a reduction from last year, when local authorities were allowed to set it at 3 per cent. Based on these limits, the watchdog has forecast that total council tax receipts will rise to £48.4billion in 2026/27, up £6.6billion on what it expects in the next financial year.

Compared to 2019/20, the final council tax take for the forecast period would represent a 33 per cent increase, up from £36.3 billion.

In its analysis, the OBR said that due to the pressures on councils it assumed that they would “take up this flexibility by close to the maximum extent”.

Last night the Institute for Fiscal Studies said that a 3 per cent increase in council tax would mean the average bill, currently £1,428, would increase by £39.92 next April.

The think tank also suggested the pressure on local authority social care services meant council tax rises of more than 3 per cent may be needed.

Earlier this year the Prime Minister announced that National Insurance would be increased by 1.25 percentage points to clear NHS backlogs and help fund a major overhaul of social care.

Most of this extra tax raid, which will form a separate health and social care levy in 2023, will be swallowed up by the NHS for the first few years.

Just £5.4billion will go to social care for the first three years, with the Treasury’s own figures suggesting £3.6billion will go to councils, of which only £200million will be available next year.

In total, English councils will receive £4.8billion of new grant funding over the next three years for social care and other services. But care groups are warning that this is “nowhere near enough”, while local authorities said much of the three per cent additional spending power that will be open to them through council tax rises would be eaten up by social care demands.

James Jamieson, the chairman of the Local Government Association, said: “It is disappointing that the Chancellor has not provided additional funding to address existing pressures on adult social care services and not increased public health funding. We remain concerned that the money allocated to social care from the Health and Care Levy will not be enough to fund reforms.

“The potential rise in local government core spending power over the next three years will be dependant on councils increasing council tax by three per cent per annum.”

Nick Clarke, head of social care at the law firm Grant Thornton, said: “The biggest financial pressures most councils are currently facing is in relation to social care, where structural demand and inflationary cost pressures show no sign of slowing down. The £4.8billion funding to local government for social care, and the recently announced Health and Social Care Levy, will help paper over the cracks for some councils for a while longer. But it will not transform social care.”

Saffron Cordery, deputy chief executive of NHS Providers, said NHS leaders would be concerned about the “longterm financial squeeze” on local government care and public health services. “While additional resources for councils announced today are welcome, the lack of specific social care investment means there is still a long way to go to create the sustainable social care system that we all need,” she said.