Do not permit any Council Tax increase of more than 5% without a referendum

No local authority should be able to increase Council Tax by more than 5% without a referendum. The Government should instead renegotiate its settlements with local authorities in England to find a way to resolve the exceptional financial difficulties that many councils find themselves in.

The public should not have to pay for a financial crisis which is not their fault through Council Tax increases above the 5% cap, unless these are approved through a public referendum.

Many people will be placed in dire financial circumstances during the cost of living crisis if their local authorities are allowed to raise Council Tax by more than 5%.

Decisions on local authorities’ tax and spending are a matter for local discretion, taken by local elected representatives, subject to the views of local people. The Government’s manifesto commits to continuing to protect local taxpayers from excessive council tax increases.

The Localism Act 2011 allows the House of Commons each year to set a threshold in relation to council tax increases, above which, a local authority in England must obtain the backing of local residents in a referendum to set a higher amount. The council tax referendum provisions are not a cap, nor do they force councils to set taxes at the threshold level.

The local government finance settlement confirmed referendum thresholds of up to 3% for core council tax and up to 2% for the adult social care precept in 2023-24. Following consideration of their exceptional local circumstances the Government decided not to oppose the request for additional flexibilities from a small number of authorities.

Legislation also requires councils to operate their own local council tax support schemes tailored to local requirements to assist people in financial hardship with their council tax.  The Government has announced £100 million of additional funding for local authorities to support the most vulnerable households in England with their council tax bills in 2023-24. This is in addition to the unringfenced funding provided through the settlement which helps to reduce bills for 3.8 million claimants

This approach strikes a fair balance between providing authorities with the flexibility to generate income for local services and protecting council tax payers. When taking decisions on council tax levels, local authorities should recognise the pressures many households are facing.

Department for Levelling Up, Housing & Communities