Council chiefs are demanding the power to impose unlimited tax rises on residents ahead of next month’s Budget, The Telegraph has learnt.
In its submission to the Treasury, the Local Government Association (LGA) will urge Rachel Reeves, the Chancellor, to remove the current 5 per cent yearly cap on tax rises.
Senior government sources insist that they have “no plans” to carry out a revaluation of council tax bands, but said any other changes will be decided in the Spending Review.
Under current rules, council tax is only allowed to be raised by a maximum of five per cent per year unless approval is granted in a local referendum.
Cllr Pete Marland, chair of the LGA’s economy and resources board, said: “It should be for councils and their residents to decide how local services are paid for, not Whitehall.
“No other tax increase is subject to the extra cost of a referendum, as all other taxes are rightly seen to be within the mandate of the elected government. The same should apply for council tax. The ballot box on local election day allows for people to pass judgement on their councils.”
He added that councils face a funding gap of more than £6 billion over the next two years “just to keep services as they are with no further cuts”.
Blaming the shortfalls on “over a decade of reducing services”, Cllr Marland said: “We need a significant change in our funding to stabilise local government finance so we can deliver the services local people want to see.”
The LGA is also pressing the Chancellor to give councils the power to axe all council tax discounts such as the single person discount.
A long-standing feature of the council tax system since 1993, the single person discount reflects the fact that single adult households make less use of municipal services than larger families.
The national single person discount gives an automatic 25 per cent off the council tax bill, but councils say this is worth about £3 billion a year and they want the power to decide locally whether to apply it or not.
Angela Rayner, the Housing Secretary, has previously expressed sympathy with the plight of financially struggling local councils and blamed the Tories who she said “took a sledgehammer” to their budgets over the past decades.
Answering a series of parliamentary questions about possible changes that could be made to the council tax system, housing minister Jim McMahon declined to rule any of them out and said: “Future local authority funding decisions will be a matter for the next Spending Review and Local Government Finance Settlement in which we are engaged.”
Yet another U-turn
David Simmonds, a Conservative MP and shadow housing minister, said: “This shows that Labour is leaving the door open to hiking council tax by stealth.
“During the election, Labour repeatedly told the public they had ‘no plans’ to increase council tax, but after less than two months in power they’ve committed yet another U-turn and are refusing to rule it out.
“It’s about time Labour came clean about what their true intentions are: increasing council tax through the back door to foot the bill for inflation-busting public sector pay rises.”
The LGA will also ask the Chancellor to enable councils to charge developers or landowners full Band D council tax for every unbuilt development which they say will encourage house-building.
Cllr Marland added: “While council tax is an important funding stream, the significant financial pressures facing local services cannot be met by council tax income alone. It also raises different amounts in different parts of the country – unrelated to need – and adds to the financial pressures facing households.”
A Treasury spokesman said: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22 billion hole in the public finances left by the last government.
“Decisions on how to do that will be taken at the Budget in the round.”
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