Council tax expected to rise by 5% a year

Council tax is expected to rise by 5% a year to pay for local services including policing, documents in the Spending Review suggest.

Local authorities have the power to raise the tax by up to 5% every year, without central government approval, although some choose lower increases.

However, Wednesday’s Spending Review assumes councils will raise it to the maximum level.

That forms part of the government’s calculations that there will be an average increase in “police spending power” of 2.3% a year in real terms.

Council tax includes a so-called police precept, which helps fund services such as regular community policing.

Police budgets are made up of funding from both central government and local government and the increase assumes a rise in the police council tax precept, Treasury documents suggest.

“This includes projected spending from additional income, including estimated funding from the police council tax precept,” the documents say.

Police leaders have already called for greater funding, with some arguing extra money provided in the Spending Review would quickly go on covering officers’ pay.

On whether councils would have to raise council tax by 5% to cover any shortfall in police officers, Chancellor Rachel Reeves said nothing had been changed in terms of the 5% council tax cap, which was brought in by the previous government.

“It is a cap, councils don’t have to increase council tax by 5%,” she told BBC Breakfast.

“That’s to invest in things like social care, but also as is normal to put money into policing.”

The Spending Review revealed the Ministry of Housing, Communities and Local Government would see a 1.4% real-terms cut in its day-to-day budget.

But the government said councils’ “core spending power” would still go up, if they increased council tax by the maximum amount.

Local services ranging from social care and libraries to bin collection and street cleaning are funded through council tax.

The local government settlement in the Spending Review provides an additional £3.3bn of grant funding in real terms for local authorities in 2028-29 compared with 2023-24.

Together with a 3% core council tax referendum principle and a 2% adult social care precept, this results in an average overall real terms increase in local authority core spending power between 2023-24 and 2028-29 of 3.1% per year, it says.

Louise Gittins, who chairs the Local Government Association, which represents councils, said there were some welcome areas of support in the Spending Review, including children’s services, affordable homes and investment in transport.

However, she said council budgets would remain under “severe financial pressure”.

“Many will continue to have to increase council tax bills to try and protect services but still need to make further cutbacks,” she said.

Tiff Lynch, acting chair of the Police Federation for England and Wales, which represents rank-and-file officers, said: “This Spending Review should have been a turning point after 15 years of austerity that has left policing and police officers broken. Instead, the cuts will continue and it’s the public who will pay the price.

“We await the government’s decision on police pay in the coming weeks. But with this Spending Review, the signs are deeply worrying; the consequences will be even more so.”