Bankrupt councils to raise tax by 10pc next April, Michael Gove announces
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Council tax will rise by up to 10 per cent in April for some households after their local town halls declared effective bankruptcy, Michael Gove has announced.
The Communities and Housing Secretary said Thurrock council in Essex and Slough in Berkshire would be allowed to put up their bills by double the usual 5 per cent maximum enforced across the country.
It will mean the typical band D bill in Thurrock could increase by £157 and Slough’s by £167, if the councils agree to put up bills by the new maximum amount.
It is the second year in a row that the two councils have been told they can increase their tax bill by 10 per cent.
The emergency rises will be imposed after both town halls issued a Section 114 notice, meaning they are unable to balance their budget.
In his announcement, Mr Gove confirmed that from next April other councils will be able to put up their bills by 5 per cent – adding more than £100 to typical bills.
Conservative councillors said they were “bitterly disappointed” by the financial settlement for local authorities, saying it would put more councils at risk of effective bankruptcy in future.
Millions face rises
The Local Government Association has warned that one in six councils – around 60 – are at risk of issuing a Section 114 notice. That would mean millions of people across the country would face council tax rises above 5 per cent to help balance the budget.
In September, Birmingham declared effective bankruptcy and at the weekend the commissioner put in charge of its finances suggested that council tax bills may have to rise by at least 10 per cent there. Earlier this month, Nottingham also issued a Section 114 notice.
However, neither of these councils were included in the government’s announcement because discussions are still going on with the city halls.
A number of other councils including Bradford and Cheshire East have warned they are at risk of declaring such a notice.
In a written ministerial statement, Mr Gove said he would allow councils to raise their core council tax by up to 3 per cent without a local referendum, plus an adult social care precept of 2 per cent for those with such responsibilities.
And he said Sadiq Khan, the Mayor of London, would be able to add £20 on to bills in the capital to pay for the transport network.
“The Government view continues to be that councils in the most severe financial failure, that are seeking multi-year support from Government, should continue to take all reasonable local steps to support recovery, including additional council tax increases,” Mr Gove added.
“Therefore, for the 2024-25 settlement, in consideration of the significant financial failure of Thurrock council, Slough borough council and Woking borough council, the Government proposes that bespoke council tax referendum principles should apply.”
He said that for Thurrock and Slough, this meant council tax could rise by 10 per cent – 8 per cent core council tax plus 2 per cent for social care.
Woking council, a lower-tier local authority, would also be able to increase council tax by 10 per cent, he said, although this will mean only an increase of around £26 as most of Woking’s bill is taken up by Surrey.
“Councils in significant financial failure can make use of any additional flexibilities provided to support their financial recovery and, going forward, the Government will consider all reasonable steps to protect both national and local taxpayers and ensure councils are acting responsibly,” Mr Gove concluded.
He said he would consult on financial disincentives to dissuade councils from entering into four-day weeks, as South Cambridgeshire recently did.
‘Bitterly disappointed’
Barry Lewis, finance spokesman of the Tory-led County Councils Network, said he was “bitterly disappointed” by the announcement.
“We have put together a strong case for emergency funding next year to address the significant financial headwinds councils face which are outside of our control,” he said. “But despite constructive discussions with ministers over recent days the Government has chosen not to act.”
Elliot Keck, head of campaigns at the TaxPayers’ Alliance said: “Taxpayers face picking up the pieces of the chaotic financial mismanagement endemic in town halls.
“Woke waste, sky-high salaries and pointless pet projects have combined with an alarming willingness to engage in get-rich-quick schemes to create a toxic mix for council finances.
“Council bosses should ensure that next year they focus on delivering key services at low cost and avoid becoming the next to go bust,” he added.
