Council tax would increase by 5 pc for households in Manchester from April under new proposals by the town hall this week. This means all properties which do not receive council tax support would pay at least £50 more a year.
This does not include the council tax precepts set by mayor Andy Burnham and the 10 local authorities which affects all Greater Manchester residents. If these charges do not change, the bill for a Band A home in Manchester - which accounts for most properties in the city - would total almost £1,300 next year.
However, households claiming council tax support would get £25 off their bills, councillors have been told. This means that those who receive the full amount of support available - a discount of 82.5 pc - would end up being 'better off'.
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A four-week consultation which opened today (January 10) invites members of the public to share their views on Manchester council's plans to raise general council tax by 2.99 pc with an additional 2 pc ringfenced for adult social care. It is hoped this will help balance the council's budget in the next financial year.
Speaking at a scrutiny meeting, Labour councillor and executive member for finance Rabnawaz Akbar said the decision - which will be made in March - will not be done lightly. But he warned that the town hall must prepare for a 'cliff edge' in funding as public finances are expected to be cut in future years.
It comes after councils were told how much money they could expect to receive from the government next year in the week before Christmas. The provisional financial settlement puts Manchester council in a better position than it expected, closing the £6.7m budget gap it had previously projected.
But the town hall will still need to make multi-million pound savings next year and faces uncertainty over its financial position for future years. Each local authority will have to decide over the next few months whether to hike its council tax and by how much, with the parameters set by the government.
However, Manchester council has said that if it does not raise council tax by the full 4.99 pc, the government would assume it has more money than it actually does and this could have an impact on future funding it receives. The government has said that this assumption is 'incorrect', but added that future funding decisions are based, in part, on the level at which council tax is set at.
Manchester council leader Bev Craig said: "Putting up council tax is not something we do lightly when we are acutely aware that there is a cost of living crisis facing many of us. But speaking to other comparable councils, we know that they have reached the same reluctant conclusion we have – that there is little choice but to look at raising council tax in line with the new limit and government assumptions.
"It’s important to stress that the extra money raised will be used to provide extra targeted support to help those who are struggling the most, support the voluntary sector’s work with them and boost adult social care. Increased support for the social care sector will also help relieve some of the well-documented pressures on the NHS."
Last year, Manchester council said it would have to make £96m of cuts over three years to balance the books, including £28m of savings next year alone. These figures assumed that there would be a 2.99 pc council tax increase.
However, since then, the government announced that local authorities would be allowed to raise council tax by up to 5 pc without requiring a referendum. Responding to the autumn statement in November, council leaders across Greater Manchester said town halls would have to make 'difficult decisions'.
Labour councillors accused the government of relying on 'ordinary people' to fund universal services, claiming that Mancunians would be among those hardest hit. This is because hiking council tax in poorer places like Manchester does not generate as much money compared to raising rates in richer areas.
This results in a 'double whammy' for councils predominantly in the North of England because people in poorer parts of the country often require more services from their local authorities, but council tax increases do not go as far. The council previously identified £42m of savings over the next three years and planned to use around £16m of reserves a year to balance the budget.
The provisional local government finance settlement published last month, means there will now be a bit more flexibility with the timing and extent of savings required and 'smoothing' reserves will no longer be used next year. However, the bottom line of next year's budget has not been confirmed yet.
The biggest cuts over the next three years are due to be in social care budgets, but town hall bosses are also considering scrapping public fireworks displays, reducing Manchester Art Gallery's opening hours and raising car parking fees. However, it is understood that all of the savings previously identified are being reviewed and could be delayed in light of the latest funding announcement.
Manchester council has had to make £428m of savings due to government funding cuts, rising inflation and a growing population over the last 12 years. Among the factors contributing to the latest budget gap, inflation - including rising energy prices - is forecast to cost £42m more than had been expected over this year and next, while lingering Covid impacts is still affecting income.
Responding to the claims that the future funding may be affected if the full council tax increase is not applied, the government said this is incorrect.
A Department for Levelling Up, Housing and Communities spokesperson said: "This assumption is incorrect – future funding decisions are based on a range of economic and financial information, including the actual council tax rates. Council Tax levels are set by local authorities, not the government. The government maintains a referendum threshold to protect residents from excessive increases.
“However, we recognise the pressures councils are facing right now. Manchester City Council will receive £604m for 2023/24, an increase in core speeding power of 10.6 pc."
Labour councillor Rabnawaz Akbar, who is the executive member for finance at Manchester council, said that the additional funding available from the government does not cover the costs of inflation. He said: "The government’s financial settlement was slightly better than we feared. But it is only for one year and there is considerable uncertainty beyond that – except that we know public sector cuts are coming down the line from 2025/26 onwards.
"To ensure that our services, especially those that help the people most in need, are on a strong and sustainable footing we need to plan ahead carefully. Our guiding principle in all of this is ensuring that we support those most in need while safeguarding the universal services which everyone relies on, from waste collection and roads maintenance to parks and libraries."
An updated savings proposals will be brought forward next month. To take part in the council tax consultation - which runs from Tuesday, January 10 to Tuesday, February 7 - residents should visit www.manchester.gov.uk/budget.
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