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Millions of municipal taxpayers are expecting increases of up to 5% in their annual bills starting in April, and those with low and middle incomes are the most affected by a sixth year of increases in England above the rate of inflation.
The tax increase, which Labor said amounted to a “£ 2 billion municipal tax bomb” for families still facing the pandemic, will continue despite Boris Johnson’s claim it would end years of austerity. .
Hundreds of city councils must decide soon whether to raise the tax to the maximum allowed by the government of 4.99% or to make big cuts in services.
The conservative-controlled Hillingdon council, which covers the prime minister’s constituency of Uxbridge and South Ruislip, is due to vote this week on proposals for a 4.8% increase in bills, while the Bath and North East Somerset, which covers House Leader Jacob Rees-Mogg’s constituency will vote for a 4.99% increase, adding £ 70 a year to the average bill.
Thinktanks and MPs from all political parties have also urged Chancellor Rishi Sunak, who will soon present a budget to the Commons, to delay any tax increases until recovery is assured.
Last year, Britain suffered its most severe decline in 300 years when the economy contracted by 9.9%. UK GDP also fell in the first quarter of 2021 due to Brexit delays at UK ports and the third shutdown affected Britain’s manufacturing and service industries.
The Institute for Fiscal Studies said last week that while economic forecasters expected a quick rebound in the second half of the year, tax increases should be delayed for at least two to three years until the economy has recovered its previous level of activity. to the pandemic. .
Anneliese Dodds, Labor’s shadow chancellor, said: “Rishi Sunak’s £ 2bn city tax bomb in the midst of a pandemic is not only economically illiterate, it is wrong. The chancellor should build confidence in the economy and support families to overcome the worst economic crisis in any major economy.
Last year, Robert Jenrick, minister of housing, communities and local government, said that the authorities “had no obligation to increase” the bills. He added that municipalities “would have the resources they need” to serve the communities and “provide first-class public services.”
His department said it had “committed more than £ 11 billion to England’s city councils to deal with the impacts of Covid-19” and had provided city councils with “£ 670 million of new grants to enable them to continue reducing tax bills. municipal next year for the less able. pay. “
But most of the municipalities that have already made a decision have chosen to increase their bills by more than 3%, and many by the maximum of 4.99%, according to the Chronicles of local government municipal tax tracker.
The worker-run Manchester City Council has told residents that without a 5% increase in bills, it should save £ 8.5 million on top of the £ 50 million it is seeking to cut from current spending.
Nick Forbes, the Newcastle City Council Labor leader, told residents that £ 28.8 million of MHCLG funding did not cover £ 60 million of emergency costs from the pandemic, leaving the city council to plug a £ 32 hole. million in budget over the next year.
According to the leaders of the conservative-dominated County Council Network, many of them limiting bill increases to 4%, more than half of their member councils were planning “moderate or severe” service reductions in social care. For adults, nearly a third were seeking big cuts in highway repair budgets, and 33% saw significant savings in library services. Councils have complained that since 2016 they have been forced to increase city tax bills for pay social care costs under the government’s social care precept.
The government cap on invoices consists of two elements, a 3% cap on the increase in the corporate precept and a maximum increase of 1.99% for the general council’s operating expenses. The municipalities that consider breaching the maximum limits must hold a referendum of neighbors.
David Phillips, associate director of the Institute for Fiscal Studies, said the city tax was a regressive tax that favored the wealthiest people. “City tax bills represent a higher proportion of income for low- to middle-income households than for high-income households,” he said.
“This means that city tax increases will generally absorb a larger share of their revenue as well, although the government is providing city councils with additional funds to help pay higher discounts for those with the lowest incomes through April 2022.”
Figures from the Office for National Statistics show that a D-band council payer in the bottom 20% of income earners last year paid £ 1,000 after additional government subsidies from disposable income of £ 16,776. A municipal taxpayer in the top 20% of wage earners paid £ 1,823 out of a disposable income of £ 91,472.
Tony Travers, a local government expert at the London School of Economics, said: “It is the ‘not so poor’ who suffer the most. Those who have sufficient income, that means they do not qualify for benefits. They are hit by city tax increases as a proportion of their income. “
