Council tax bills are set to jump by an average of £110 next year after ministers gave the green light to inflation-busting rises.
Downing Street said councils will be allowed to hike bills by up to 5 per cent to help meet rising costs.
The rise is three times the 1.7 per cent inflation rate and will allow councils to increase the average £2,171 Band D bill by almost £110.
It comes just a fortnight after Rachel Reeves raised taxes by £40 billion in the most eye-watering Budget in history, and despite repeated Labour attacks on the Tories over similar council tax rises.
Last year Sir Keir Starmer’s party even said it would freeze the hated levy to help ease the cost of living.
Yesterday’s admission came after the Prime Minister was skewered over council tax in the Commons by Tory leader Kemi Badenoch.
Council tax bills are set to jump by an average of £110 next year after ministers gave the green light to inflation-busting rises (file image)
Keir Starmer was accused of plotting to ditch the cap on council tax during bad-tempered PMQs clashes on Wednesday
The premier ducked as Tory leader Kemi Badenoch demanded to know whether the 5 per cent ceiling would be maintained
Sir Keir repeatedly ducked questions about whether he would ditch the annual cap on council tax rises, which was introduced by the Conservatives following double-digit increases under the last Labour government.
Mrs Badenoch said figures pointed to a £2.4 billion ‘black hole’ in council finances which would have to be plugged by higher taxes, increased charges for things such as parking, or cuts to services.
Downing Street was later forced to clarify that the cap will be retained for next year and set at 5 per cent again, despite a sharp fall in inflation.
A government source said the 5 per cent cap would not necessarily translate into a similar tax rise as it would be ‘up to individual councils’ to decide what to charge. But most are expected to increase bills by the maximum amount.
Darwin Friend, of the TaxPayers’ Alliance, urged ministers to curb council waste rather than signing off another round of bill hikes.
‘Taxpayers will be bracing for another penny-pinching year ahead,’ he said.
‘Councils across the UK have either increased council tax or threatened to increase it. While the cap has not been scrapped, the increase of 5 per cent will still hit hard-pressed households.
A study of Government data, by the Taxpayers Alliance campaign group, outlined how total council tax receipts soared from £12.2billion in 2000-01 to £38.5billion in 2023-24
The region where council tax receipts increased the most between April to June this year - compared to the first quarter of 2023-24 - was the North East
The council with the largest increase in council tax receipts in the first quarter of this financial year, compared to April to June 2023, was Durham (34.2 per cent)
The council with the largest increases in council tax receipts since 2010-11 was Tower Hamlets (160 per cent)
‘The Government needs to crack down on councils to ensure that they are keeping costs to a minimum and delivering front-line services at the best possible value for residents.’
It came as:
- Ministers faced a growing backlash over National Insurance hikes, with the British Retail Consortium warning it would ‘make job losses inevitable, and higher prices a certainty’
- The British Medical Association said the NI increase represented an ‘existential’ threat to GP surgeries
- Mrs Badenoch said Sir Keir had ‘not thought through the impact of the Budget’ after ministers signalled they would use NHS resources to bail out hospices and GP practices hit by the NI raid
- Labour’s VAT raid on private schools descended into chaos as institutions found themselves unable to register for a tax due to come into force in January
- Ms Reeves prepared to unveil plans for a major shake-up of the pensions sector to boost the Government’s dismal economic growth forecasts
In opposition, Labour complained bitterly about the impact of rising council tax bills on the cost of living. At last year’s local elections, Ms Reeves said she would use £2.7 billion from a new windfall tax on the oil and gas industry to freeze council tax bills.
At the time, she said: ‘While the Tories think the cost-of-living crisis is all over, Labour is on the side of working people.’
The pledge was not repeated in Labour’s manifesto this year, and a government source said Labour had been ‘very clear’ that it only applied in the circumstances in 2023 when it was not in power.
But Deputy Prime Minister Angela Rayner hinted at a freeze again as recently as September.
The rise is three times the 1.7 per cent inflation rate and will allow councils to increase the average £2,171 Band D bill by almost £110 (file image)
Darwin Friend, of the TaxPayers’ Alliance, urged ministers to curb council waste rather than signing off another round of bill hikes (file image)
Asked whether she would ‘take this opportunity to reassure the House that the Government has no plans to increase council tax as they assured us before the election’, Ms Rayner replied: ‘Yes.’
Tory MP Kevin Hollinrake said: ‘It’s only after coming under pressure from Kemi Badenoch that Keir Starmer revealed Labour have broken their promise not to raise council tax.
‘Labour made a political decision to gift their union paymasters an inflation-busting pay rise and now it’s renters and homeowners who are paying the price.’
In the Commons yesterday, Sir Keir accused the Tories of leaving local authority finances in an ‘absolutely catastrophic state’.
But Mrs Badenoch hit back, saying: ‘The fact is that the Government do not know what they are doing. Their ideological Budget was designed to milk the private sector and hope that nobody would notice.
‘Now, his Cabinet Ministers are all queuing up for public sector bailouts for his tax mess.’