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Households brace for £600 rise in council tax

Council tax
Raising council tax by the maximum allowed would still not raise enough cash to cover proposed social care plans - Yui Mok/PA

Households should brace for a £600 rise in annual council tax bills regardless of who wins the election, according to the Institute for Fiscal Studies (IFS).

The think tank said the failure of all parties to set out detailed plans on how they would pay for social care proposals would force councils, which deliver the services, to drastically raise taxes.

Increasing council tax by 5pc per year – the maximum allowed annually without a local referendum – would raise the average band D property’s annual bill by £600 by the end of the next parliament.

David Phillips, associate director at the IFS, said councils were “struggling to fund their existing responsibilities” even without ambitious plans from the next government.

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He said: “This is particularly true for adult social care services, where the Conservative, Labour and Liberal Democrat manifestos made commitments to expand service provision.

“However, none has identified sufficient funding to fully cover the costs of their proposals.”

Increasing council tax by the maximum allowed would still not raise enough to cover proposed social care plans, the IFS warned, with cuts to other services also likely.

Current financial plans indicate “protected” areas such as the NHS will receive more cash in the coming years, while “unprotected” spending, which normally includes local government, will see cuts that the IFS estimates at between 1.9pc and 3.5pc per year in real terms.

“If demand and above-inflation cost pressures continue to grow in line with recent history, councils could be forced to cut back some areas of service provision,” the IFS said.

“This would be true even if funding from central government were frozen in real terms (rather than being cut alongside other ‘unprotected’ areas) and council tax was increased at 5pc per year – equivalent to over 3pc a year above inflation, its fastest real-terms rate since the 2001-05 parliament.”

Kevin Bentley, of the Local Government Association (LGA), said the shortfall amounts to £6bn over the next two years and called on the next government to set out plans to send more cash to councils.

He said: “A funding gap of more than £6bn facing local services over the next two years – fuelled by rising cost and demand pressures – means a chasm will continue to grow between what people and their communities need and want from their councils, and what councils can deliver.

“The LGA is calling on all political parties to commit to a significant and sustained increase in funding for councils in the next spending review, alongside multi-year funding settlements and plans to reform the local government finance system.”

A Conservative Party spokesman said: “Labour’s unfunded social care policy would cost £600m every year and forms part of their £38.5bn spending black hole. This means they would increase council tax and other taxes by at least £2,094 for every working family.

“Only Rishi Sunak and the Conservatives have a clear plan to take the bold action needed to provide dignity and security to those in social care. Keir Starmer cannot say what he would do to fix social care because he doesn’t have the courage or conviction to take difficult decisions, taking the country back to square one.”

A Liberal Democrat spokesman said: “Our manifesto sets out how we will tackle the funding crisis facing local authorities, including by boosting the supply of social housing with 150,000 new social homes a year, and forging a long-term, cross-party agreement on social care – the main cause of the black hole in council budgets.”