Councils warn of tax rises in 2022 despite funding injection

Leaders of England’s largest councils have warned that that they will have to reluctantly raise council tax next year to keep local services running, as they face a funding gap of over £500 million in 2022.

In October’s Spending Review, the government announced an extra £1.5 billion for local government in 2022/23 and will set out how it is distributed in the Local Government Finance Settlement later this month. But an analysis from the County Councils Network shows that even if this funding was largely targeted at addressing demand pressures in adult social care, it would still leave a ‘minimum’ funding shortfall next year of £561 million between the 36 councils in its membership.

Even with this ‘best case’ scenario, the CCN says that county leaders will have little choice but to raise council tax or cut services to try and make up the shortfall. As a result, county leaders say that they recognise that the cost of living is going up for residents, but they face difficult decisions on raising council tax in order to set a balanced budget next year.

The government’s Spending Review figures presumes that councils will levy a one per cent social care precept to help fund social care services next year, in addition to having the choice to raise council tax by a further two per cent for other services.

This present year, some councils also choose not to levy the full three per cent social care precept flexibility, meaning those councils are also able to levy any remaining percentage balance in 2022/23.

Council leaders are calling on the government to target the majority of the £1.5 billion next year on care services. However, with this pot of money also aiming to compensate councils for increased costs from a rise in National Insurance contributions next April, not all of it will be spent on addressing service pressures.

Therefore, the funding shortfall for CCN’s 36 councils is likely to be larger than the £561 million best case scenario.

Tim Oliver, chairman of the County Councils Network, said: “For council leaders, the winter period when we must set our budgets is one of the most difficult times of the year, though the government’s funding for local government in the Spending Review is a significant boost for councils and has made the process a little easier this time.

“However, it is not the silver bullet to our funding shortfall and many of us will still face a substantive gap in their finances. We recognise that our residents will be feeling the pinch after a tough 18 months with the cost of living rising, whilst some may be facing uncertain employment prospects.

“County residents already pay the highest rates and those county leaders that do propose rises of the maximum permitted will be doing so as they have little choice other than to substantively reduce local services.”

The average council tax bill in county areas this year is £1,994 – with 16 county areas levying rates over £2,000 a year for a standard Band D property, due to those areas being less generously funded in previous years. This is the highest average rate in England – and some £600 more than the average in central London.