Labour will raise council tax by an additional £1.8 billion in 2025 – London Business News | Londonlovesbusiness.com

Communities minister Mathew Pennycook has said he expects the government will raise council tax by £1.8 billion in 2025 to 2026.

Pennycook said that business rates with funding will contribute £600 million for new homes.

Councils in England will be allowed to increase council tax up to 3% and an additional 2% for adult social care.

If councils want to increase the tax to more than 5% then a referendum will have to be held or receive government permission.

The increase means those who are living in a band D home will pay more than £100 in 2025 which is above inflation.

Pennycook told the House of Commons, “Decisions on the council tax levels to set or whether to hold a referendum to go beyond the referendum principles sits with councils.

“But the Government has been clear that it expects the threshold to be maintained at the current level set by the previous government.”

He accused the Tories of creating a “mess” in local government, he added, “That’s why at the Budget we announced over £4 billion in new local government funding, including an additional £1.3 billion in the local government finance settlement.”

David Simmonds the shadow communities minister said, “Answers to parliamentary questions show that the Government is expecting spending power to increase by £3.7 billion, funded by grants of £1.3 billion.

“That demonstrates that the Chancellor’s Budget has opened up a £2.4 billion black hole in council finances.”

Pennycook told Simmonds, “The Government is committed to a fair funding settlement for local government. We will set out further details in the usual way in the upcoming local government finance settlement, which will be presented to Parliament.

“On the £2.4 billion figure, I’m afraid we simply don’t recognise it. I assume (Simmonds) in his calculations has failed to take account of the over £300 million raised in business rates, £300 million in additional new houses to come along.

“So it is right that £1.8 billion will be raised through council tax in 2025/26, but as I made clear that is because the Government is clear that we’re maintaining the previous government’s policy on council tax, in line with the OBR (Office for Budget Responsibility) forecast made in March 2024.”