Yearly council tax rises will not prevent £19bn deficit

Although almost every council with responsibilities for social care in England will be raising council tax for residents in April, local authorities still face a funding shortfall of £19 billion over the next five years.

The is according to new analysis by the County Councils Network (CCN), which reveals that councils face a funding shortfall of a £19.1 billion in the period to 2025; an annual funding gap of £3.8 billion. This is despite the government providing councils with the largest real-terms funding increase in a decade, which will cut their deficit by 35 per cent.

Council leaders says that recent funding pledges are a ‘lifeline for local services’ but are calling on the government to use next month’s Budget to commit to long-term funding for councils.

CCN analysis of all 133 councils who have so far published their draft budgets out of 151 social care authorities, which will be ratified next month, shows that all councils plan on raising council tax in April – 133 local authorities, with 18 still yet to declare their intentions. All but two of these are proposing to levy a full two per cent social care precept, ringfenced for care services.

Of these councils, 116 plans to raise council tax by the full amount permitted – 3.99 per cent. For residents, their council tax bills will vary across the country. Taxpayers in county areas will face an average rise of £69 compared to £45 for residents in Inner London. The average Band D will rise to £1,853 in shire counties, some 40 per cent higher than Inner London (£1,332). CCN say higher council tax levels in their areas are due to historically lower funding.

Of the £19 billion funding shortfall – an analysis which assumes councils will raise council tax each year until 2025 – the 36 authorities represented by the CCN account for £7.7 billion of this funding gap, 41 per cent of its total.

An independent study last year showed that councils faced a deficit of £46 billion over the next five years. Revised forecasts show that even if all the funding announced for councils continued to 2025 this figure would reduce 35 per cent to £30.4 billion. If all councils raised their council tax by four per cent next year, and two per cent for following four years, the deficit would be a further 24 per cent lower at £19 billion.

David Williams, chairman of the CCN, said: “Council leaders have worked hard to convince ministers of the need to provide councils with additional resources and they have responded with the largest increase in funding for over a decade. This funding is welcome and a lifeline for local services. However, despite this, today’s new financial forecasts for the next five years make tough reading for councils and taxpayers alike. This is why the government must use the March Budget to signal that councils will receive a further cash injection in the Spending Review.

“No council leader wants to raise their council tax, especially after residents have faced rises over the last few years, but today’s figures show that we simply do not have a choice. Unfortunately – this pattern is set to continue, but even yearly council tax rises for residents over the next five years still leaves councils with a huge £19 billion shortfall, meaning local politicians will need to continue to make really tough decisions to meet rising demand for services.

“At the same time, county residents shoulder an unfair burden compared to those who live in the cities and the capital, paying rates at double what some inner London councils are able to charge, due to more generous funding for the capital. The government’s Fair Funding Review could help correct these funding imbalances and we are committed to working with ministers to ensure that the review is implemented next year. More investment in local government, and fairer funding for counties, will allow councils to not just preserve but improve frontline services, whilst investing in local and national priorities.”