In the past week, two councils facing unprecedented financial uncertainty outlined plans to dim street lights in order to make necessary savings. One – Havering Council in London – is teetering on the edge of issuing a section 114 notice (which is issued by a council’s chief financial officer and freezes all non-essential spending). The other – Birmingham Council – declared itself effectively bankrupt in September 2023.
Both councils are also proposing large increases to their council tax bills in response to the rocky financial landscape they currently face. The maximum amount that upper-tier local authorities (county councils and unitary authorities) in England may increase council tax by is 4.99 per cent annually. This is constituted of 2.99 per cent for general council tax, and a further 2 per cent to fund social care. If they wish to raise bills further, they must either hold a local referendum or request permission from the government.
Several of the councils that have recently issued section 114 notices – including Slough, Thurrock and Woking – have requested to raise council tax above this threshold to 10 per cent per year. After receiving permission from government to take up this raise, Birmingham Council has said it will raise residents’ council tax bills by 21 per cent over two years.
But bankruptcy aside, new research by the County Councils Network (CCN) – the body that represents upper-tier authorities – has found that almost all of England’s county and unitary councils plan to raise council tax by almost 5 per cent this year. Out of the 136 councils that have published their proposals, 95 per cent (128) will raise council tax by the maximum permitted for the 2024-24 financial year. This is a major rise from the 2023-24 financial year, when the CCN’s research found 75 per cent of upper-tier councils planned to oversee the maximum raise in council tax.
Every council that has outlined its plans for 2024-25 has said it will raise council tax – no council has opted to freeze bills for residents. Just 17 have yet to declare their council tax plans for the next financial year.
[Read more: English councils are facing an 'out of control' financial crisis]
In February, the government unveiled the final local government financial settlement for the next financial year. The settlement makes a further £64.7bn available to councils and represents, according to the Department for Levelling Up, Housing & Communities, a 7.5 per cent increase in cash terms. This also included a further £600m for councils that the Secretary of State Michael Gove announced earlier this year, after more than 40 Conservative MPs wrote to the government calling for them to increase the money given to councils.
However, part of this £64.7bn in funding for 2024-25 is contingent on England’s local authorities raising council tax. The CCN’s research shows that despite receiving £240m in additional funding – and with planned savings of £1bn – England’s county and unitary councils still face a funding gap of £1.1bn over the next two years.
Sam Corcoran, the vice-chair of the CCN said council leaders have “little choice but to take the difficult but necessary decision” to make the maximum raise. Corcoran is the leader of Cheshire East Council, which has recently warned of its own precarious financial situation – and could soon be forced to issue a section 114. He added: “No council leader takes the decision to raise council tax lightly as we know this will add to the cost of living for residents, but councils have had little choice but to put up council tax due to increased demands, particularly in children’s services.”
[Read more: Council bankruptcy tracker: authorities under increasing financial strain]
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