Why has Labour allowed such big increases in council tax?

As the government gives six local authorities permission to raise the tax by up to 10 per cent, Sean O’Grady looks at the reasons behind the decision

Six councils in England have been granted special permission by the responsible secretary of state, Angela Rayner, to raise council tax by up to 10 per cent (PA)

Not since the bad old days of the poll tax has the normally dry world of local government finance been so wracked by penury, crisis and politicking. Some local authorities have already spectacularly gone bust – notably Birmingham City Council – while many more are on the edge, and now six councils in England have been granted special permission by the responsible secretary of state, Angela Rayner, to raise council tax by up to 10 per cent – above the usual cap of 3 per cent (or 5 per cent for those councils with responsibility for social care).

Normally they’d be required to hold a local referendum on anything bigger. Draconian though the tax rises are, they are unlikely to place English local government on a sustainable footing...

Who’s getting a hike?

The six are: Bradford (Labour-run, 9.99 per cent); Newham (Labour, 8.99 per cent); Windsor and Maidenhead (Liberal Democrat, 8.99 per cent); Somerset (Liberal Democrat, 7.4 per cent); Trafford (Labour, 7.4 per cent); and Birmingham (Labour, 7.4 per cent). Hampshire, one of a number of hopeful councils turned down by Rayner, is going to hold a referendum anyway.

Why won’t there be a referendum in Bradford, Windsor, Birmingham and elsewhere?

It’s not entirely clear, but in her statement, Rayner said: “We have agreed to a limited number of requests, and in all cases have not agreed to the full amount requested. Where we have agreed, it is only for councils with amongst the lowest levels of council tax, and where we expect, even after these increases, residents will still be paying less than the average compared with similar councils. At a national level, even with these increases, the overall increase in council tax is not expected to exceed last year’s.”

The real reason, perhaps, is that they’d all collapse if the voters rejected the proposals, which would wreck local confidence, embarrass the parties concerned, and be futile – as, in reality, a local authority cannot simply default on its debts or its statutory obligations. So the council tax would end up being hiked anyway by commissioners appointed by Rayner.

Why is local government in a mess?

It varies, and there are often special circumstances. Birmingham, for example, was hit with an unpayable bill for £1bn to settle a historical equal pay claim. Other councils overspent on rescuing shopping malls, or were otherwise spectacularly incompetent. The wider picture is a very long period of “austerity” and underfunding, cynically organised by the Conservatives in central government to transfer the blame for cuts in public spending to local authorities, especially those run by Labour and the Liberal Democrats (though Tory authorities such as Woking also went bust).

On the spending side, the town halls have faced inexorable demands for social care, housing, and special educational needs. It’s surprising, in fact, that so many have survived this long.

What’s the political impact?

Inevitably it can be focused on whichever party or parties happen to be running an authority when it collapses, ramps up the council tax, or both. But local elections can turn out to be informal verdicts on how central government is going, and are an opportunity to register a protest vote – so Labour councillors will find it difficult to defend their seats in the future. Thus, sooner or later, Farage and Reform UK may expect a bumper crop of councillors.

This May, the losses will mostly befall the Conservatives in the county councils, defending a strong performance in 2021, the last time such elections took place – though many councils have postponed elections pending reorganisation.

English local government, with its low election turnout, irrational local taxation (unrelated to income) and heavy reliance on Treasury grants is at best imperfectly accountable to its citizens. There is a consultation out now, due to finish next week. It may yield a better way forward, but no party has yet been brave enough to make the necessary radical reforms beyond – as they are doing now – reorganising the tiers. So it’s going to stay a mess.