Councils to raise £7.5bn in stealth tax raid after Sunak relaxes threshold for local vote

HOUSEHOLDERS face a £7.5billion council tax raid after local authorities increased rates without consultation, according to an analysis by the Office for Budget Responsibility.

The OBR said councils will increase taxes by £1.8billion next month – up to £100 a month for many households – after the Government allowed them to impose increases of up to 5 per cent.

This could culminate in an increase of £7.5 billion by 2025-26.

Councils can normally raise local taxes by no more than 2 per cent without a referendum. But the Chancellor increased the limit to 5 per cent in his November review to help meet councils’ ballooning social care costs.

The OBR’S estimates suggest twothirds of councils will raise taxes up to the maximum 4.99 per cent, meaning increases of between £50 and £100 for band D properties.

The OBR said the Chancellor’s decision had forced it to revise up its estimate of the increase in council tax by £800 million to £1.8 billion for 2021-22.

“This is more than explained by the Government’s decision to allow councils to increase council tax rates by up to 5 per cent … rather than the 2 per cent our March 2020 forecast assumed,” said the OBR in its Budget day report. It pushes the total council tax take for 2021/22 to £39.9billion, rising to £45.6 billion by 2025/26.

Local tax campaigners said it was a “stealth” tax that would undermine Boris Johnson’s levelling up agenda, while senior Tories, fiscal experts and council leaders blamed the Government’s failure to solve the social care crisis for the increased bills.

Andrew Dixon, founder of the Fairer Share campaign for property tax reform, said: “This … will only exacerbate the unfairness of the current system where modest homes in the North often pay significantly more than mansions in Knightsbridge. It is sure to sit

RISHI SUNAK has left the door open for another stealth tax raid after leaving a manifesto commitment to raise the national insurance contributions threshold to £12,500 out of the Budget.

On Wednesday, the Chancellor confirmed personal allowances on income tax, pensions, inheritance tax and capital gains tax would be frozen until 2026, netting the Treasury an additional £21billion as more people are dragged into higher tax rates over time.

However, in the Budget Red Book, he has also kept open the option to change a number of NIC thresholds at future budgets, handing the Exchequer the ability to raise billions of pounds in additional revenues if required.

In 2019, Boris Johnson told voters that his “ultimate ambition” was to raise the level at which people begin paying both national insurance and income tax to £12,500 – a move which would save taxpayers £500.

Last year’s Budget also confirmed the NI primary threshold – over which employees’ earnings are taxed at 12 per cent – would rise to £9,500. It described this as “the first step in meeting the Government’s ambition to increase these thresholds to £12,500”.

Mr Sunak has confirmed that the threshold will increase again to £9,568 from April, along with the upper rate, which will increase to £50,270 and stay frozen until 2026 in line with the personal income allowance.

But the future level of the primary threshold has not been set, with the

document stating only that it would with “all other NICS thresholds … be considered and set at future fiscal events”.

The 102-page Red Book does not appear to mention the Government’s ambition to raise the threshold to £12,500 once. Approached for comment, a Treasury spokesman said that raising the NIC threshold to £12,500 was still the Government’s “ultimate ambition”.

However, they acknowledged that there was no timeline for doing this.

The omission suggests Mr Sunak has kept open the possibility of temporarily freezing the lower NIC thresholds, should he need to boost tax receipts again in future.

He has already chosen to freeze other personal allowances due to the limited revenue-raising options available to him because of the manifesto pledge not to increase income tax, VAT or NICS during this Parliament.