LGA Pushes for Unlimited Council Tax Hikes in UK Budget Proposal

The Local Government Association (LGA) is set to propose significant changes to the council tax system in its submission to the Treasury ahead of the September 2024 Budget. This move comes as local authorities grapple with substantial funding gaps, estimated to exceed £6 billion over the next two years.

Currently, council tax increases are capped at 5% annually unless approved by a local referendum. The LGA, representing local councils in England and Wales, is advocating for the removal of this cap, arguing that local authorities should have the autonomy to determine how services are funded.

Pete Marland, chair of the LGA's Economy and Resources Board, stated, "It should be for councils and their residents to decide how local services are paid for, not Whitehall." He emphasized that unlike other taxes, council tax increases are subject to referendum requirements, which the LGA views as an unnecessary burden.

The LGA's proposal extends beyond removing the increase cap. It also suggests eliminating all council tax discounts, including the long-standing single person discount introduced in 1993. This 25% reduction for single-adult households is estimated to cost councils around £3 billion annually.

Additionally, the association proposes charging developers or landowners full Band D council tax for unbuilt developments, aiming to incentivize house-building. These measures are part of a broader strategy to address what Marland describes as "over a decade of reducing services" since approximately 2014.

The Labour government, in power since July 2024, faces scrutiny over its stance on these proposals. Angela Rayner, the Housing Secretary, has previously expressed sympathy for struggling councils, blaming Conservative policies for budget cuts.

However, opposition figures, such as Conservative MP David Simmonds, accuse Labour of potentially implementing "stealth" tax increases. Simmonds stated, "This shows that Labour is leaving the door open to hiking council tax by stealth."

The Treasury, acknowledging the complex financial landscape, indicated that decisions on spending, welfare, and tax would be made comprehensively in the upcoming Budget. A spokesperson noted the need to address a £22 billion deficit in public finances left by the previous administration.

As the debate unfolds, it's worth noting that council tax contributes significantly to local authority funding, accounting for about 60% of core spending power in England. The proposed changes could have far-reaching implications for local governance and household finances across the UK.

"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."

The outcome of these proposals will be closely watched as the government navigates the delicate balance between local authority needs and national fiscal responsibilities in the upcoming Budget.