Spending Review may allow councils to raise more through council tax

11 Feb 19

Local government can expect an “ungenerous” deal in the Spending Review but it maybe be able to raise more in council tax.

This was the prediction of deputy director of the Institute for Fiscal Studies Carl Emmerson, speaking at a joint Institute for Government and Institute for Fiscal Studies briefing on the Spring Statement and Spending Review today.

Councils had been squeezed more than other public services because of austerity, he told delegates, adding: “We would expect this to continue”.

But he thought the government might allow councils to plug funding gaps by raising council tax to higher levels without the need for a referendum. Councils can currently raise council tax to 2.99% without the need for a referendum.

“While there could be an ungenerous grant settlement there might also be flexibility to raise more council tax,” he said.

“It would be a relaxation of what central government allows local government to do with its council tax rate.”

Cash-strapped Northamptonshire County Council was recently given the ability to raise it’s council tax by 4.99% in the next financial year, which it has taken advantage of.

Gemme Tetlow, chief economist at the IfG and panellist at the event, agreed: “Local government has born the brunt in recent years.”

She said: “In local government, the main trade off has been between the statutory services that councils must provide [like adult and children’s services] and non-statutory services.”

Tetlow noted that adult social care demand has increased due to demographic pressures, while demand for children’s social care has also increased “but we are not sure why”.

She also suggested that the chancellor may decide to make the 2019 Spending Review cover just a one-year period because of Brexit. 

“In general we would encourage longer Spending Review periods to give greater long-term certainty, but we are in an unusual situation with Brexit,” she said.

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