Millions face higher than usual council tax hikes amid bid to stabilise services

Millions of households are facing a council tax hike beyond normal thresholds this year, as Angela Rayner warned of further “tough decisions” to “rebuild and stabilise” local government.

The Deputy Prime Minister (pictured) said challenges remain in the Government’s bid “to fix the broken system we inherited”, and stressed the need to strike a balance between preventing councils experiencing “further financial distress” and the “interests of taxpayers”.

Six councils, serving more than two million people in total, have been granted permission to increase council tax beyond the established annual threshold of 5%.

Bradford Council will be able to increase the levy by a further 5%, while Windsor and Maidenhead Council and Newham Council can all increased bills by 4%.

The remaining councils – Birmingham, Somerset and Trafford – have been granted a further 2.5% uplift beyond the threshold.

Explaining the move in a written statement, Ms Rayner said: “These are difficult decisions that Government has not taken lightly. We recognise the importance of limited increases in helping to prevent these councils falling further into financial distress – but we have been clear this must be balanced with the interests of taxpayers.

“We have agreed to a limited number of requests and in all cases have not agreed to the full amount requested. Where we have agreed, it is only for councils with amongst the lowest levels of council tax, and where we expect, even after these increases, residents will still be paying less than the average compared with similar councils.”

Ms Rayner confirmed that in spite of these increases, the overall national increase in council tax is not expected to exceed last year’s rise of 5.1%.

The statement confirmed that councils will have access to more than £69 billion in funding this year – a 6.8% increase in cash terms compared to 2024-25.

The settlement provides more than £2 billion in direct grant funding above revenue received from council tax, with no council experiencing a reduction in core spending power.

The Government previously announced £233 million for homelessness services and £500 million for pothole repairs.

A “Recovery Grant” has been established worth £600 million as an interim measure.

Ms Rayner confirmed that £60 million has been put aside for “long-term improvements”, including facilitating further a “devolution revolution” and fixing the system of local government audit which has been plagued by delays in recent years.

In addition, the Government is providing up to £3.7 billion additional funding to councils with social care responsibilities, including a £880 million boost to the Social Care Grant.

A new Children’s Social Care Prevention Grant will be increased to £270 million in 2025 and 2026. It will be allocated according to “estimated need” and will see investment in prevention for children double more than £500 million.

Overall, the Government said it is providing more than £10 billion for social care.

Ms Rayner also confirmed allocations worth £502 million to assist councils to manage the impact of increases to employer national insurance contributions.

The Deputy Prime Minister added: “Councils deliver vital services across the country – driving growth and local economies and providing a lifeline for those that need it most.

“Through our Plan for Change we are determined to fix the foundations of local government; investing where it is needed, trusting local leaders and working together to deliver growth, better health and social care services and the affordable homes people need.”

The County Councils Network (CCN) said the £600 million recovery fund will be heavily targeted at councils in major cities and towns at the expense of county areas.

It added the impact of this will be compounded by the increase in the national living wage and national insurance changes, with dedicated additional funding in the settlement outweighed by the new burdens faced by its members.

Barry Lewis, CCN finance spokesperson, said: “Consequently, more than four in five CCN members say they are in a worse position than before the Autumn Budget and this finance settlement, and one third say their service reductions next year will now be severe.

“Considering there is very little fat left to cut from many of these services already, a further reduction will have a material impact on our residents.”

London Councils, which represents all 32 London boroughs, said its members still face a collective £500 million funding gap in the coming year despite receiving a 5.7% increase in their core spending power.

The organisation said its analysis showed seven councils in London will require exceptional financial support from the Government to balance the books this year, compared to just two councils in 2024-25.

This scenario would require the amount of support funding for struggling councils in the capital to increase from £70 million in 2024-25 to £430 million in 2025-26.

Claire Holland, chair of London Councils, said: “The impact of homelessness on Londoners – especially families with children – is devastating, and the costs to boroughs are utterly unsustainable.

“With more and more boroughs forced to turn to the Government for exceptional financial support simply to stay afloat, it is clear that there is a long way to go to end the crisis in local government finance.”

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