Latest news with #fundingreform
Daily Mail
4 days ago
- Business
- Daily Mail
Wealthier areas set to pay more council tax under new plans: Will you be affected?
Wealthy areas with lower-than-average council tax rates will have to pay more under new government plans, a leading think tank has warned. Deputy Prime Minister Angela Rayner is mulling an overhaul of the council tax system to allocate more money to deprived areas. It will mean households in wealthy areas, including London and the home counties, will be hit with huge council tax increases, according to the Institute of Fiscal Studies (IFS). How will your area be affected and are there more council tax rises on the horizon? Why could some households pay more council tax? Angela Rayner is consulting on reforms about how funding is allocated between local authorities in England and how much councils can raise via council tax. The IFS report suggests the changes will see around a quarter of councils lose money in real terms, and there will be 'winners and losers' as ministers try to address different levels of funding across the country. However, this means that cuts in funding in wealthy areas that have managed to keep council tax bills low will have less money to spend, even if they increase prices by the maximum amount. The IFS says these councils should be able to make it up by increasing their rates beyond the current cap. IFS senior economist Kate Ogden said: 'The Government should consider giving highly affected councils, which currently have low council tax rates greater flexibility to bring their council tax bills up to more typical levels to offset funding losses.' The Government proposes a 'notional' tax rate which will be equal to the average council tax across all councils to help equalise the amount local authorities can raise. One area of consideration is offsetting central government grants against what local authorities could raise from council tax. The IFS says it shows 'just how large the funding changes some councils are set to see are'. Which areas could be affected? The IFS says the biggest losers will be inner London boroughs, particularly in Sir Keir Starmer's constituency Camden, Westminster and Kensington and Wandsworth, which has one of the lowest council tax bills. A Band H property - worth over £320,000 - in Westminster pays £2,034 a year in council tax. A house in the same band in Bishop Auckland, Durham, pays £4,279. Areas that have kept rates low and 'done well out of business rates retention' will also be hit, according to the IFS, which also singled out Cherwell, Mid-Suffolk and North West Leicestershire. How much could council tax increase by? Some households have already suffered significant council tax increases this year, after the Government gave the green light to increase rates by as much as 9 per cent. The IFS report suggests some councils could hike rates higher than the 4.99 per cent maximum rate that can be imposed without the need for local referendum or applying to ministers for permission to raise rates. It says that the average tax rate proposed by the government would increase in line with Office for Budget Responsibility (OBR) forecasts, and the actual council tax rate charged by local authorities would increase in line with the cap. What could it mean for your local council? The new reforms are expected to help lower-income households but it is likely to have a knock-on effect on local services, such as adult social care and bin collections. If the reforms were introduced this year, inner London councils would suffer budget cuts of 19 per cent, while the north and Midlands would have increases of up to 6 per cent. There is no word on how the government will decide which areas are wealthy and which are deprived. It is likely to face backlash on how it is measured, too. Some London boroughs like Islington and Kensington and Chelsea are generally considered wealthy, but pockets are among the most deprived in the country. Will there be more council tax rises next year? The IFS predicts Rayner's reforms will be staggered over three years so these proposals are unlikely to start immediately. Local authorities will still need to make up funding shortfalls and therefore it is very likely that they will need to hike rates again next April. It means households could pay up to 4.99 per cent more than they are currently, but increasing numbers of near-bankrupt councils could apply to the government to hike as much as 9 per cent.
BBC News
25-07-2025
- Business
- BBC News
Surrey County Council heading to a financial 'cliff's edge'
A council in Surrey could be pushed to the brink of financial crisis if government reforms go ahead, aimed at evening out local authority funding, its leader has Oliver said Surrey County Council could be heading towards a "cliff edge" under proposals which could dramatically reduce its government is looking at scrapping the current council tax funding model in favour of a national 100% "equaliser" system where each local authority gets the same amount of council leader Mr Oliver's warning came during a cabinet meeting, where he suggested the government's Fair Funding Review would hit Surrey harder than most councils due to its higher council tax base. Mr Oliver said: "There is an expectation we will look to our residents to fill that gap. "That gap won't be filled- can't be filled- even if we were to increase council tax by 5%."Currently, Surrey has a high council tax base, meaning it has more band H houses, paying at least £3,692.70 in 2025, compared to other parts of the funding reforms under consideration could flatten out this advantage by reallocating resources away from wealthier counties like Surrey and towards lower-income authorities, according to Local Democracy Reporting Oliver said: "It's absolutely essential that we drive efficiencies wherever possible."A government statement on the Fair Funding Review said: "Our reforms will take into account the different needs and costs faced by communities across the country, including adjusting for the costs of remoteness faced by rural communities, and the ability of individual local authorities to raise council tax, while also resetting business rates income."It will update the crucial formulae used to calculate funding allocations, which are a decade out of date."
The Independent
03-07-2025
- Politics
- The Independent
Rayner announces leg up for ‘remote' UK councils
Deputy Prime Minister Angela Rayner announced a comprehensive review of local government aimed at slashing red tape and reforming funding. The new funding formula will account for deprivation and the 'remoteness' of rural areas, considering travel times for services like bin collection and homecare. This initiative seeks to replace decade-old data and ensure equitable funding distribution, addressing concerns raised by countryside authorities. Plans also include introducing a 'public interest test' to reduce costly dependence on external providers and move away from outsourcing as a default. The proposals are open for consultation with councils and local authorities, with the government aiming for implementation by April 2026.
The Independent
20-06-2025
- Business
- The Independent
Labour plans council tax shake-up that could see rich areas pay more
Labour is proposing a significant reform to council tax funding, aiming to make it fairer by directing more central government funds to areas with the highest need. The new approach seeks to alleviate the burden on local authorities that currently impose large council tax increases with little return, by enabling them to request lower rises. The reform will likely result in less central funding for areas where local services are not as stretched. A Ministry of Housing, Communities and Local Government official said the current system has led to "perverse outcomes" and the new plan aims to be fairer to councils that have historically faced difficult financial decisions. A consultation has been launched by the MHCLG to evaluate how new funding allocations will be made, including assessing needs for adult social care, children's social care, and Special Educational Needs and Disabilities funding.
Telegraph
20-06-2025
- Business
- Telegraph
Rayner ‘wants council tax rise in the south to fund the north'
Council tax bills will rise in the south to fund investment in the north, it has been reported. Angela Rayner, the deputy prime minister, is to announce plans for a 'progressive' funneling of Government grants to authorities in deprived areas. According to The Times, Ms Rayner will set out a new formula which will see the grants redistributed depending on local needs. The changes are expected to reduce the grant funding received by wealthier local authorities in London and the south east, which experts said would likely prompt council tax hikes to make up for any shortfalls. Approximately half of council incomes currently come from Government grants. Ms Rayner will reportedly cite discrepancies in council tax levies between richer and poorer areas. A three-bedroom semi-detached house in Hartlepool, Co Durham, comes with a higher levy than an £80 million mansion in Westminster. David Phillips, of the Institute for Fiscal Studies, told the newspaper that reform was overdue. 'It's been 20 years since we've had an effective system to allocate funding between councils so it is out of whack and the changes are going to be big,' he said. 'We would expect urban areas in the Midlands and north to benefit, and maybe some of the east London boroughs. But the Westminsters and Wandsworths of this world, which set very low council tax, will lose.
