- The amount councils must pay will increase, according to the OBR
- The watchdog added that despite the increase, many councils can still cut services.
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Struggling households will see a £12.9bn-a-year increase in council tax by 2029 but will still see cuts to services, the Office for Budget Responsibility (OBR) warned today.
Households across the country are already facing higher-than-inflation council tax rises as local authorities struggle to stay afloat.
But following Chancellor Jeremy Hunt’s budget today, the OBR used the slide rule for how the UK’s public finances could change in the future.
The financial watchdog said it expects council tax to rise from £44.6 billion a year now to £57.5 billion within five years, in 2028/29, a jump of 28.9 per cent.
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Almost all local authorities plan to increase their council tax by 4.99 percent from April 2024.
But that hasn’t been enough to keep many councils stable.
Since 2020, nine councils have found that their future spending commitments will exceed their income, including Birmingham City Council, which is seeking a £1.255bn bailout loan from the Government.
The OBR also raised the specter of more councils cutting services further, despite rising council tax bills.
The OBR said: ‘Since 2010-11, local authority spending has fallen from 7.4 to 5.1 per cent of GDP in 2022-23, and in our forecast it falls further to 4.7 per cent of GDP in 2028-29.
“Given the legal obligation on local authorities to provide a range of services where demand is likely to continue to grow, for example adult and children’s social care, the pressure on local authority finances and services will continue.”
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Many councils are already cutting spending on services such as rubbish collection, pest control, public toilets, adult social care and pothole repairs.
This trend has been worsening since 2009/2010, when the Government made cuts to taxpayer funding local authorities receive.
The Institute of Government said central government grants were reduced by 40 per cent between 2009/10 and 2019/20 alone, in real terms.
Councils whose finances are in very poor shape can vote to issue a section 114 notice.
These are resolutions to cut all new spending other than the council’s legal requirements, such as social care and waste disposal.
Fourteen councils have submitted these notifications since it became possible to do so in 1988.
However, nine of those 14 have issued notices since 2020.