Bankrupt city council to increase residents’ taxes by 10pc

Council tax in Birmingham is on track to rise 10pc despite “financial mismanagement” at the local authority causing it to go bankrupt.

Last night, the Government approved Birmingham council’s plans to raise council tax by double the annual 5pc tax rise cap – which will add an extra £ 200 to hundreds of thousands of households’ bills.

The Labour- run council issued a section 114 notice last September, declaring effective bankruptcy as it tried to juggle a £760m equal pay bill and an £80m overspend on an IT project. It is now trying to save £ 300m over the next two years.

In December, council leader Max Caller wrote to the Government asking for permission to raise council tax in 2024 by more than 4.99pc, the normal limit, without having to hold a local referendum.

Michael Gove, the Levelling-Up Secretary, has now responded that, while the Government has expressed ongoing concern about the “significant financial mismanagement” at the council, it will not oppose the city’s request to raise taxes by a further 5pc.

Mr Gove added: “It is disappointing that Birmingham taxpayers are having to foot the bill for the council’s poor governance and decision-making.

“While the Government will not oppose this request given the seriousness of the circumstances, any decision to increase council tax is solely one for the council, which should have taken into account the cost pressures people in Birmingham are currently facing.” Cllr Caller has previously said the extra 5pc on council tax will raise an extra £20m.

A 10pc rise will mean a bill increase of about £195 a year for a band D property, and £390 on the most expensive band H homes.

Last year, the Local Government Association warned that one in six councils – about 60 – were at risk of effective bankruptcy. Other councils to declare themselves bankrupt and then receive permission to raise council tax by 10pc in April include Slough, Thurrock and Woking.

Telegraph analysis last month showed the vast majority of English households face inflation-busting council tax rises of 5pc in April.