Council tax freeze takes £2.8bn out of budgets, CIPFA finds

4 Mar 15

The government’s council tax freeze has saved households in England £168 a year, but cost public services around £2.8bn, CIPFA’s annual survey and analysis has found.

The institute revealed that average B and D council tax will rise by 1% next year, taking the bill up to £1,483.92 from £1,467.94 in 2014/15. This demonstrated of the effect of the government’s council tax freeze grant and the requirement on local authorities to hold a referendum for planned increases in excess of 2%, CIPFA said.

However, its analysis showed that had council tax risen in line with the Retail Prices Index measure of inflation, average council tax bills would be £168 higher next year, yielding an extra £2.8bn in funding for local authorities. This amount is equivalent to the entire road maintenance budget for the UK or the public health grant for local authorities.

CIPFA chief executive Rob Whiteman said: ‘Although it is welcome news that action by the government has seen households saving money on council tax, it is also important to look at the cost of this.

‘This data shows that if council tax had risen in line with inflation over the past few years there would now be additional funding available for areas in which it is critically needed, such as adult social care, which in turn would relieve some of the pressure on the NHS.’

He added that an ‘urgent debate’ on the council tax system was needed.

‘We must candidly address whether enforcing a virtual freeze on council tax over an entire Parliament is sustainable and what the government and local authorities can do to update it to better fund crucial public services.’

The survey also revealed that London authorities were once again planning the lowest increases, with an average rise of 0.1%. Unitaries were planning a 1.1% increase, mets a 1.2% increase and other non-met districts a 1.4% increase.

A regional breakdown showed that the average rise was highest in the East Midlands (1.8%) and lowest in Greater London (0.2%) and the East of England (0.9%).

Authorities choosing not to take the government freeze grant were planning an average council tax increase of 1.3%.

Local Government Secretary Eric Pickles said: ‘Under last administration, council tax bills more than doubled, pushing the typical bill to £120 a month from hard-working people and pensioners. Council tax became a big worry for those trying to balance family budgets. This government has given families greater financial security, by taking decisive action to keep council tax down, cutting bills in real terms.

‘I welcome the news that so many councils have signed up to the council tax freeze this year, and it speaks volumes that only one local authority wants to take a council tax hike to taxpayers in a local referendum.’

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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