MPs warn council tax review 'long overdue' as council finances risk becoming unsustainable without reform

There should be a “long overdue” review of council tax, MPs have warned the Government, as local government finances risk becoming unsustainable without reform.

The Commons Housing, Communities and Local Government Committee’s recommendation to increase the number of council tax bands comes as they say the “single biggest threat” to local authority finances is the “failure” to properly fund child and adult social care, the report says, with some town halls having to put 60% - 70% of their budgets towards this.

A report from the committee - chaired by Sheffield MP Clive Betts - said councils should be allowed to retain 75% of business rates from 2022 and council tax should be reformed with the revaluation of properties and the introduction of additional bands.

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In the longer term it said the Government should consider replacing council tax and business rates with a new “proportional” property tax.

Clive Betts, pictured May 2019

Budgets have been “strained” since austerity measures were introduced in 2010, the committee added, with three councils – Northampton, Croydon and Slough – having to admit they had run out of money.

Committee chairman Clive Betts said: “Council budgets have been stretched for several years and the social care funding crisis is at the heart of financial pressures for many councils.

“Covid-19 has also hit councils hard and, while the Government responded to the pandemic with substantial financial support, they now need to come forward with a long-term sustainable way of funding councils and the services they provide.”

Labour Rotherham council leader Chris Read said more than a decade of cuts have left authorities in “a precarious position” with councils in south Yorkshire having to reduce spending by more than £1billion.

He told The Yorkshire Post: “Ten councils have needed emergency capitalisation directives in order to balance the books, which is unprecedented.

“At the same time councils have needed to meet growing costs of providing social care whilst the government has failed to even propose a viable system of provision. The combination of all those factors is a disaster for local services, leaving residents without libraries, children’s centres and bin collections that they might previously have taken for granted – and at the same time it weakens the local economies that need investment the most.

In the end though, councils cannot continue to provide the services that communities rely on without a meaningful solution to fund social care, ending the failed experiment of local business rate retention, and increasing the overall resources available – and that would be a dramatic change of direction from this government.”

A spokesman for the Ministry of Housing, Communities and Local Government said: ““We gave councils over £9bn in response to specific pressures from the pandemic last year - that's over £2bn more than they told us in detailed reporting that they spent to tackle COVID-19. We have already provided £3bn in additional funding for this year.

“Longer term funding decisions are a matter for the upcoming Spending Review, where we will assess the long term demands on councils and the resources needed to meet them.”