Council tax will have to soar by a quarter over the next three years to keep vital services running at current levels – adding nearly £500 to average yearly bills in the latest hammerblow to under-pressure household finances.
The Local Government Association (LGA) said councils need an extra £8billion by 2024/25, largely due to an ageing population that means more will need social care.
The extra money is needed merely to keep social care services at the same quality as at present, even though thousands of people are already being forced to do without the help they need.
It is also needed for child protection, homelessness prevention, waste and recycling, and road maintenance.
The LGA said that unless Rishi Sunak ploughs in extra funding from central government in this autumn’s spending review, council tax will have to rise by 25 per cent to pay for the services.
Such an increase would see the average band D council tax bill in England soar from the present £1,898 to £2,372 – a rise of £474. But under current rules that would not be possible as town halls are unable to raise bills by more than 2 per cent, plus 3 per cent for social care, without a local referendum.
The potential council tax rise comes on top of a number of recent spending hikes, with taxpayers forking out even more for their national insurance, petrol prices and energy bills.
Expected 10p-a-lire petrol prices are set to increase drivers’ annual costs by around £83 a year.
Yesterday the chaos in the gas markets led to a lifting in the energy bill cap by £139 a year.
The recently-announced rise in national insurance will cost those on £50,000 a year an extra £500 annually while rising inflation, the end of the stamp duty holiday and the £20a–week universal credit boost all mean bad news for personal finances.
Town hall leaders warned last night that unless Rishi Sunak (pictured) ploughs in extra funding from central government, council tax will have to soar by 25% over the next three years – adding nearly £500 to average yearly bills
The Local Government Association (LGA) said councils need an extra £8billion by 2024/25, largely due to an ageing population that means more will need social care
The rising cost of living
Council tax: Potentially up by 25 per cent in three years, adding £474 for band D households
Fuel prices: Experts predict fuel prices will rise by up to 10p per litre in coming weeks, adding up to £83.10 for the average driver per year
Energy bills: Prices rise by £139 a year on average from this week, as day-ahead UK gas prices reach near-record levels at 203p, a five-fold increase on this time last year
National insurance: Those earning £30,000 a year will pay an extra £255 in tax to fund social care costs. The contribution rises to £500 for people on £50,000 salaries
VAT holiday for hospitality: An emergency rate cut from 20 per cent to 5 per cent for hospitality was brought in under Covid but the rate has now returned to 12.5 per cent for six months before returning to its original level in April
Universal credit: The £20-a-week uplift, which was introduced at the start of the Covid pandemic, will be scrapped next week, meaning a loss of £1,000 a year
Furlough: Covid bailout scheme comes to an end, despite up to a million workers still relying on the handouts
Stamp duty holiday: Buyers can no longer avoid paying stamp duty on their properties after the government ended the holiday
Inflation: The headline CPI rate recorded its largest jump ever in August to 3.2 per cent. The consumer prices index rose above the expectations of analysts to reach its highest level for more than nine years. The rate is far above the 2 per cent target set by the Bank of England.
LGA chairman James Jamieson said: ‘Councils continue to face severe funding and demand pressures that will stretch the local services our communities rely on to the limit. Securing the long-term sustainability of local services must therefore be the top priority in the spending review.
‘If we are to come out of this pandemic with a society that is truly levelled up, the vital services that councils provide must be at the heart of it.
‘Councils need certainty over their medium-term finances, adequate funding to tackle day-to-day pressures and long-term investment in people and transforming places across all parts of the country to turn levelling up from a political slogan to a reality that leads to real change for people’s lives.
‘Levelling up has to also mean a radical reset of the relationship between central and local – building back better means building back local.’
The LGA is calling on the Chancellor to use the spending review to create an ongoing Community Investment Fund worth £1billion in 2022/23.
This non-ringfenced fund could be used by councils to invest in supporting individuals, strengthening communities and tackling priorities in their areas, including health inequalities – all of which will be vital to levelling up across the country.
The group’s analysis estimates an average increase in annual cost pressures facing councils of £2.6billion per year to maintain services’ current level of access and quality, meaning the same services will cost around £7.8billion more to provide in three years’ time.
Of this, £1.1billion per year is related to adult social care – in addition to a pre-existing £1.5billion provider market pressure – £0.6billion to children’s social care and £0.9billion to other council services excluding education, police and fire services.
In recent years, ministers have relied on council tax raising powers to increase councils’ core spending power.
The LGA said while the tax is an important funding stream, it has never been the solution to long-term pressures – it raises different amounts in different areas, unrelated to need, and adds to households’ financial pressures. It comes as 50 charities signed an open letter to Mr Sunak demanding he pumps billions more into social care in the spending review. They said Boris Johnson’s plans to fix social care will fail without an extra £4billion a year.
Last month the Prime Minister unveiled his social care plan to ensure elderly people are not hit with sky-high bills. But it does not include extra money for social care until 2023, meaning people will face cuts to care over the next two years unless more funding is ploughed in.
The charities, including Age UK, Care England and Marie Curie, asked for an increase in annual funding of £3.9billion by 2023/24.
Sunak’s £500m to help poorest pay winter bills
By John Stevens Deputy Political Editor
Rishi Sunak yesterday unveiled a £500million scheme to help the poorest families pay their bills this winter.
It comes as the Chancellor pushes ahead with the end of furlough and the cut to Universal Credit at a time when costs are spiralling. Up to 700,000 jobs are at risk after the furlough scheme closed yesterday.
A £20-a-week increase in Universal Credit introduced during the pandemic is due to finish next Wednesday. The new Household Support Fund will see councils in England given money they can hand out in small grants to help meet daily needs such as food, clothing and utilities.
Lifeline: Rishi Sunak’s yesterday unveiled a £500million scheme to help the poorest families pay their bills this winter (stock image)
Mr Sunak called it a ‘lifeline’ and said: ‘Everyone should be able to afford the essentials and we are committed to ensuring that is the case.’ He stressed the fund would mean ‘three or four million families getting an extra £100, £150.’
Anti-poverty charity the Joseph Rowntree Foundation blasted the ‘11th hour attempt to save face’ before the Universal Credit cut. Deputy director Helen Barnard said: ‘By admitting today that families will need to apply for emergency grants to meet the cost of basics… it’s clear the Chancellor knows the damage the cut to Universal Credit will cause.’
New Economics Foundation modelling has found 710,000 furloughed jobs are at risk.
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