Home Estate Planning Give councils more tax flexibility amid financial strain, ministers urged

Give councils more tax flexibility amid financial strain, ministers urged

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Councils should be given more free rein to raise local taxes to shore up ailing finances and then “suffer the consequences” at the ballot box, MPs have heard.

Ministers were questioned about giving more flexibility for councils to hike taxes, as MPs debated the £64bn funding package for local councils for next year.

Councils usually have to hold a referendum to increase local rates beyond a limit imposed by the Government, currently set at a five per cent rise.

Local councils, including those run by Tory administrations, have voiced their disappointment with next year’s settlement.

Seven councils have effectively had to declare bankruptcy since 2020 because they are unable to balance the books in light of increasing spending demands.

Labour warned the national picture was unsustainable, adding that increasing council taxes after cuts to local services left people “paying more and more for less and less”.

Tory MP Sir Desmond Swayne said: “Is he comfortable that we are persisting with protecting our constituents from the local councils that they elect in terms of the referendum threshold?

“When are we going to allow local governments to govern and suffer the consequences if the electorate disagree with what they have done?”

Communities minister Lee Rowley said it was a “longstanding principle… that we allow local councils the flexibility to be able to make decisions about the finances in their local areas while also taking a general view that there are caps in place around how far they can go.”

Rowley said there was “finite resource” to help councils with spending obligations, but stressed it was “important to support local government in the face of the increasing demands for services, the rising inflation and costs that are the legacy of the war in Ukraine and instability in the Middle East, and that is exactly what we are seeking to do.”

He told MPs the settlement for next year totalled “nearly £65bn”, including “an increase in core spending power of up to £4.5bn compared to 2023-24”, which taken with others measures would “ensure that all authorities see a minimum increase in core spending power of four per cent before any local decisions on council tax rates”.

The minister confirmed three councils who declared themselves bankrupt would be offered the chance to raise council tax beyond normal thresholds without holding a referendum.

Thurrock and Slough will have a core council tax threshold of eight per cent, while Woking will be able to increase bills by 10 per cent.

Shadow communities minister Jim McMahon warned the settlement would not address the “unsustainable and growing crisis in adult social care, children’s services, and homelessness services”, and called on ministers to make multi-year commitments for council funding to give local government certainty.

He added: “In one of the worst cost-of-living crises seen for generations, it is shameful and an indictment that the council tax bill is set to top £57bn under the Conservatives, which is more than twice (seen) under the last Labour government.

“It stands as a matter of fact that people are paying more and more for less and less.”

Press Association – David Lynch

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