Hard-up households will suffer a £12.9billion-a-year rise in council tax by 2029 but still see services cut, the Office for Budget Responsibility (OBR) warned today.
Households across the nation are already facing higher-than-inflation council tax rises as local authorities struggle to stay afloat.
But following Chancellor Jeremy Hunt’s Budget today, the OBR ran the slide rule over how the UK’s public finances could change in the future.
The financial watchdog said it expects council tax to rise from £44.6billion a year now to £57.5billion in five years’ time, in 2028/29 – a leap of 28.9 per cent.
Piling on the pounds: Most councils will be hiking council tax by almost 5 per cent this year
Almost all local authorities are planning to increase their council tax by 4.99 per cent from April 2024.
But that has not been enough to keep many councils stable.
Since 2020, nine councils have found their future spending commitments will outstrip their income, including Birmingham City Council, which is seeking a £1.255billion bail-out loan from the Government.
The OBR also raised the spectre of more councils slashing services further – despite council tax bills going up.
The OBR said: ‘Since 2010-11, local authority spending has fallen from 7.4 to 5.1 per cent of GDP in 2022-23, and it falls further in our forecast to 4.7 per cent of GDP in 2028-29.
‘Given local authorities’ statutory duty to provide a range of services where demand is likely to continue to grow, for example adult and child social care, pressure on local authority finances and services will continue.’
Many councils are already slashing spending on services such as bin collections, pest control, public toilets, adult social care and fixing potholes.
This trend has been worsening since 2009/10, when Government made cuts to the taxpayer funds that local authorities get.
The Institute for Government said central Government grants were slashed by 40 per cent between 2009/10 and 2019/20 alone, in real terms.
Councils whose finances are in a very poor state can vote to issue a section 114 notice.
These are resolutions to cut all new spending on anything other than a council’s statutory requirements, such as social care and waste disposal.
Fourteen councils have filed these notices since it became possible to do so in 1988.
However, nine of those 14 have issued the notices since the year 2020.
