Residents will see 'inflation-busting' council tax rises under new government plan, Labour warns

Local councils will be allowed to introduce “inflation-busting” council tax hikes under new plans announced by ministers today, Labour has warned.

James Brokenshire, the housing and communities secretary, said the new local government funding plan will see councils given permission to raise council tax by up to 3 per cent next year.

Overall, the plan will see council budgets rise by £1.3bn – from £45.1bn to £46.4bn.

Labour said the proposals will see local residents asked to foot the bill for cuts in central government funding.

However, Mr Brokenshire said any 'excessive rises' must still be approved in a local referendum.

At the same time, police and crime commissioners will be allowed to raise the policing element of council tax by up to £24 – twice as much as this year's limit.

The plan will also see local authorities in rural areas given £16m more to help them deliver services for local people.

Announcing the new funding settlement, Mr Brokenshire told MPs: "Local residents will continue to be protected and be able to approve or veto any excessive rise in a referendum.

“There is so much excellent inspiring work that is under way in our local communities and it is right that we get behind it and have faith in the authorities who day in, day out always deliver.

"This settlement and the extra funding announced in the Budget reaffirms that faith, delivering a cash terms increase of 2.8 per cent and a real terms increase in spending for local authorities in 2019/20.”

But Andrew Gwynne, shadow communities secretary, said: “Today's announcement means only two things for households – an inflation-busting increase in council tax, and no end in sight for austerity.

"Local government is under enormous pressure because of politically motivated Tory cuts that have hit our poorest areas hardest since 2010. Councils have lost 60p out of every £1 that the last Labour government invested in our communities.

“The council tax precept has already proven to be an inadequate and short-term sticking plaster for a problem which needs long-term solutions. Shifting the burden on to council tax payers creates a postcode lottery in services with the most deprived authorities suffering most."

Speaking in the Commons, he called the new funding settlement “the worst secret Santa ever”, saying much of its contents had already been announced in the Budget earlier this year.

Mr Brokenshire hit back: "I'm disappointed that he has not recognised the increases in spending that have been set out in the Budget and I've again underlined and highlighted further spending within the statement today.

"One of my colleagues questioned whether he might be the Gwynne-inch that stole Christmas."

The government also announced that some local authorities will be allowed to keep more of the money they make through business rates.

A pilot scheme will see 15 councils across the country, as well as the London boroughs, allowed to keep 75 per cent of business rate revenues.

The government wants to increase the proportion of business rates retained by councils from 50 per cent to 75 per cent from 2020 onwards.

Town halls said the latest measures did not do enough to meet councils' spending black holes.

Lord Porter, chair of the Local Government Association (LGA), said: “Next year will continue to be hugely challenging for all councils, who still face an overall funding gap of £3.2bn in 2019/20. It is therefore disappointing that the government has not used the settlement to provide further desperately-needed resources for councils next year.

“Many councils will be forced to take tough decisions about which services have to be scaled back or stopped altogether to plug funding gaps. We must not forget that it is individuals and communities who feel the impact, whether it is through seeing their local library or leisure centre close, roads deteriorate or support for young people, families and vulnerable adults scaled back."

Councillor Paul Carter, chairman of the County Councils Network, said: “Whilst today’s settlement contains vital short-term support, it does not solve medium term financial pressures so tough decisions will still need to be taken and our members will have little choice but to raise council tax to meet demand-led pressures in services.

“Looking ahead, we should be under no illusions of the scale of the challenge facing county authorities, with the long-term future of councils dependent on whether we receive sustainable and fairer funding from 2020 onwards."