North East leaders have spoken out against the “unthinkable” prospect of hiking council tax bills by five per cent next year.
Chancellor Jeremy Hunt announced in his Autumn Statement that he would be increasing the maximum amount by which local authorities can raise council tax without needing to hold a local referendum, up from the current three per cent. The Treasury is said to have estimated that the vast majority of councils will increase their bills by the maximum level in order to plug gaps in their finances, but the move has sparked major concerns about deepening the money woes felt by households across the North East during a devastating cost of living crisis.
In an open letter to Mr Hunt this week, Newcastle City Council leader Nick Kemp warned that many people would be forced into deeper hardship by a five per cent hike – and condemned an “inherent unfairness” that means richer areas will generate more money through the rise, but their residents are less in need of council-funded social services.
Coun Kemp wrote: “I do not accept that this option to further tax our residents, many of whom cannot afford it, will raise the levels of money needed to fund the increased crisis services that this tax will itself create, let alone the increasing levels of demand for essential social care services that have been skinned to the bone by over £350m Conservative Government cuts to our budgets over the last decade.”
The Labour leader added: “Poorer areas like Newcastle will raise far less through tax but have a far greater demand for services like social care, child protection, and homelessness prevention, and this need will only be exacerbated by the impact of making low income council tax-payers poorer. To put this in stark perspective, we estimate that a one per cent uplift in council tax for adult social care services in Newcastle in 2023/24 would be worth £1.2m (based on our current council tax base) but would be worth a whopping £8.3m in Surrey (£2.2m on a net budget like-for-like basis).”
At a meeting of the North East Combined Authority (NECA) on Tuesday, Durham County Council leader Amanda Hopgood also condemned the idea. The Liberal Democrat, who heads the county’s coalition administration, called council tax a “fundamentally broken system” and claimed that other parts of England can generate 10 times the income from it that North East authorities can.
Labour’s Martin Gannon, the leader of Gateshead Council, agreed that it would be “incredibly difficult” to raise council tax by the amount the Government expects. Coun Gannon, whose authority is consulting on plans to shut down some leisure centres in order to save money, told the NECA board: “Five per cent would raise for us £4.3m, if we did the unthinkable and raise council tax in an area which is already suffering dreadful poverty and deprivation.
"We used £10m in reserves last year to produce a budget – that is gone now. And we are facing a £10m gap next year, £55m in the next five years, and overspending this year because of the rise in energy bills and inflation by somewhere around £6m. Raising council tax by five per cent is a burden on the people of Gateshead, Durham, Sunderland, South Tyneside… but it will go nowhere near filling the cavernous gap left by Government cuts.”
Around 95% of councils are expected to hike payments by the full five per cent permitted, according to Treasury analysis. Mr Hunt said that the “flexibilities” would mean an increase in funding available for the social care sector of up to £2.8bn next year and £4.7bn the year after.
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