Rishi Sunak faces backlash over plans to allow local authorities increase council tax

Rishi Sunak is facing a backlash over plans to allow local local authorities to raise council tax by five per cent in another blow to millions of families battling soaring bills and a cost-of-living crisis.

The Prime Minister and his Chancellor Jeremy Hunt are poised to lift the decade-long cap on increases, amid warnings that hundreds of local authorities could go bust.

Households will face an average £100 yearly hike in council tax under the new plans to allow town halls to help fund social care, taking their annual bill above £2,000 for the first time ever.

Homeowners in the top Band H could even pay as much as £200 extra, with their bills surpassing £4,000, The Telegraph reports. 

Mr Sunak is understood to have approved the plans despite local authorities not being able to increase general council tax by more than two per cent without a local referendum. 

In recent years town halls have been allowed to raise an additional 1 per cent to pay for social care, making a total of 3 per cent. 

But the proposal have been met with discontent among some Conservative MPs amid fears that the Tory-led councils will suffer at May’s local elections as a result. 

Bob Blackman, the Conservative MP for Harrow East, told The Times: ‘In my view, council tax should be set at a local level. However, by easing or taking away the referendum lock, the political risk is that Conservative-run councils will get blamed for increasing council tax. 

‘It could make the local elections even more challenging next year.’

And Jonathan Gullis, MP for Stoke-on-Trent North, added: ‘It is a very blunt mechanism. Most importantly and worst of all, those who are most vulnerable in bands A to D will be hit in the pocket even harder.

‘Hitting people on low incomes even harder in the pocket at the time of a cost of living crisis will undermine trust, particularly in public services where people will question whether they’re getting value for money.’

Mr Hunt has already warned of a ‘very difficult announcement’ in his Autumn Statement on Thursday.

He said: ‘But we’ll be asking people who have more to contribute even more. And that will be reflected in our decisions on council tax and every other tax as well.’

A source said that giving town halls more flexibility to raise money would ease the pressure to increase central funding.

‘Councils are facing pressure on social care, and the social care levy, which would have raised money to help, has gone,’ the source said. 

‘So there is a case for allowing councils more flexibility where they can make the case for it locally.

‘But we would still be talking about increases below inflation – no-one is talking about returning to the sort of rises we saw under Labour.’ 

A 5 per cent rise on an average Band D bill of £1,966 would cost an extra £98 next year.

The move is likely to be announced by Mr Hunt in Thursday’s Budget. But Whitehall sources said wrangling was continuing within Government over exactly how much flexibility to allow.

Some ministers are resisting the move, arguing that it would pile pressure on families already facing the worst cost of living crisis in decades. 

But councils are pushing for the freedom to set their own bills without constraint, arguing that their ability to provide core services is being eroded by inflation.

The Local Government Association has warned that councils face a £3.4billion funding gap next year ‘just to maintain services at pre-Covid levels’. 

It told the Treasury that to fill the gap using council tax alone, bills ‘would have to increase by well over 10 per cent next year’. 

A survey by the County Councils Network last week warned that almost four-fifths of authorities fear they could go bust next year without further funding.

Council tax referendums were introduced by the coalition government in 2012 following years of inflation-busting rises under the previous Labour administration.

Sources said the referendum requirement would be kept in place, but only for increases of 5 per cent or above. 

It comes as a survey due out today by care association Adass reveals that 94 per cent of social care directors believe their service does not have enough staff or resources to get through the winter.

Adass chief executive Cathie Williams said the sector ‘desperately’ needs emergency funding, noting that £500million pledged in September to support hospital discharges has not yet been allocated.

A survey found that more than nine in ten social care directors felt their area did not have enough staff or funding to get through winter as they call on increased resources to prevent people dying early. 

But the hike in council tax will be the latest cost of living blow for struggling families and pensioners, who are reportedly coming out of retirement due to economic fears.

It comes as millions of households face a cost of living crunch in April, with average energy bills rising by £900 as the Government’s cap ends.

Britons are also facing soaring food prices and high fuel costs which have helped push inflation up to more than 8 per cent, while homeowners face higher mortgage costs due to rising interest rates.

And earlier this month, in particularly grim news, the Bank of England warned the UK faces its longest recession since the Great Depression. 

However, the PM hinted that pensions triple lock will remain as a Government policy. 

Mr Sunak said: ‘I am someone who understands the particular challenge of pensioners. They will always be at the forefront of my mind.’

Elsewhere in Mr Hunt’s Autumn Statement, 700,000 families are at risk of losing child benefits by 2028.

The Chancellor is set to freeze the £50,000 threshold for six years despite rampant inflation.

The move is part of a wider freeze on thresholds – including on inheritance, capital gains and pension lifetime allowance – which will see millions paying more tax for years. 

• An earlier version of this article included an incorrect reference to an average £100 council tax rise being monthly, not annual, which has since been removed.