Council tax set to hit the highest-ever level, new analysis reveals

COUNCIL tax is set to rise to the highest rate on record, according to new analysis.

Research to mark the start of the new tax year from the Resolution Foundation found that council tax increases are heading for a joint record high, projected to hit 1.8 per cent of GDP in the next parliament.

The think tank said that this is “not a great trajectory for Britain’s worst-designed tax, which is both regressive and hopelessly out of date as it is based on property valuations 33 years ago.”

It comes as the recession the UK entered in the latter half of 2023 was slightly less severe than first thought, according to data from the Office for National Statistics.

The economy still shrunk for two quarters in a row, the definition of a recession, but the total contraction over that six-month period dropped from 0.5 per cent to 0.4 per cent.

This is because of a small revision to the fourth quarter where the rate of contraction fell to 0.31 per cent from 0.34 per cent.

Combined with the third quarter, unrevised when measured to two decimal places, that left a slightly lower headline figure, the ONS said.

“Our updated set of GDP figures shows quarterly growth unrevised across 2023, with a little growth in the first quarter and small contractions in the latter half of the year,” said ONS director of economic statistics Liz McKeown. “New figures on households show that savings remained high, with an increase in income in the last quarter of the year.”

Rob Wood, the chief UK economist at Pantheon Macroeconomics, said that while the new figures mean the UK was in a “technical recession”, it is still possible that later revisions to the numbers will undo this. He added: “The recession was driven by consumers saving more in response to higher interest rates and fears about the economy.”

Chancellor Jeremy Hunt said: “The Prime Minister’s pledge last year was to halve inflation and he delivered on that.

He added: “Having done that, he then said we would grow the economy. I don’t think any of us were expecting the economy to actually grow last year: the Bank of England wasn’t, the Office for Budget Responsibility wasn’t, in fact it did, albeit at a very slow rate.”

Labour shadow chancellor Rachel Reeves said: “Rishi Sunak has broken his promise to grow the economy and left Britain in recession with working people paying the price.”