UK councils' plan for 'unlimited tax hikes' laid bare ahead of Rachel Reeves budget

Council leaders have asked the Government to enable them to impose unlimited tax hikes on residents ahead of next month’s Budget, according to reports.

The Local Government Association (LGA) will urge Rachel Reeves, the Chancellor, to scrap the existing five per cent annual cap on tax rises.

The Telegraph reports that senior government sources claim they have “no plans” to undertake a reassessment of council tax bands, but claimed that any other alterations will be decided in the Spending Review.

Current rules stipulate that council tax is only allowed to go up by a maximum of five per cent per year unless approval is given by residents in a local referendum.

Cllr Pete Marland, chair of the LGA’s economy and resources board, told the outlet: “It should be for councils and their residents to decide how local services are paid for, not Whitehall.

“No other tax increase is subject to the extra cost of a referendum, as all other taxes are rightly seen to be within the mandate of the elected government. The same should apply for council tax. The ballot box on local election day allows for people to pass judgement on their councils.”

He added that councils are facing up to a £6 billion funding black hole over the next 24 months “just to keep services as they are with no further cuts”.

Blaming the gaps on “over a decade of reducing services”, Cllr Marland said: “We need a significant change in our funding to stabilise local government finance so we can deliver the services local people want to see.”

The LGA is also demanding the Chancellor grants councils the power to reduce every single council tax discount, including the single person discount.

The single person discount has been in place since 1993, and reflects the likelihood that individuals living alone are less of a drain on local services.

The national single person discount sees 25 percent sliced off the council tax bill, but councils now argue that they should decide locally whether to apply it or not.

Housing minister Jim McMahon declined to rule any changes to the council tax system, saying: “Future local authority funding decisions will be a matter for the next Spending Review and Local Government Finance Settlement in which we are engaged.”

David Simmonds, Tory MP and shadow housing minister, said: “This shows that Labour is leaving the door open to hiking council tax by stealth.

“During the election, Labour repeatedly told the public they had ‘no plans’ to increase council tax, but after less than two months in power they’ve committed yet another U-turn and are refusing to rule it out.

“It’s about time Labour came clean about what their true intentions are: increasing council tax through the back door to foot the bill for inflation-busting public sector pay rises.”

Cllr Marland added: “While council tax is an important funding stream, the significant financial pressures facing local services cannot be met by council tax income alone. It also raises different amounts in different parts of the country – unrelated to need – and adds to the financial pressures facing households.”

A Treasury spokesman said: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22 billion hole in the public finances left by the last government.

“Decisions on how to do that will be taken at the Budget in the round.”