Residents are being forced to pay more Council Tax so that local authorities can foot £278million in extra costs due to Treasury policy, it has been claimed.
Critics suggest that the shortfall in funding has been caused by Rachel Reeves raising employers’ National Insurance Contributions (NICs) in her Budget in October.
The rate will rise from 13.8% to 15% on a worker’s earnings above £175 from April. The threshold at which employers start paying up on each of their employee’s salary will be reduced from £9,100 a year to £5,000.
Now, the County Councils Network (CCN), a body that represents England’s 37 county councils and unitary authorities, has warned the Chancellor that increasing taxes these costs has saddled its town halls with a huge financial burden.
Council Tax rates are based on property values (Image: Getty)
This is set to increase council tax bills for locals, the Telegraph reports. The newspaper adds that the Government is set to provide English county councils with £176million in order to offset the cost of the levy change.
There is also a planned increase to the National Living Wage (NLW) – £12.21 an hour from April 1 – to take account of.
Analysis by CCN and the Society of County Treasurers (SCT) suggests that the costs of the NLW increase will be £454million next year for county and rural unitary authorities, while the direct and indirect cost of the NICs rise will amount to £488million for their councils alone.
In a consultation response published earlier this month, the CCN said that the overall increase in funding provided in the 2025-26 settlement for local government (£1.3billion) is “welcome”.
However, it added, these additional funds needed to be looked at within the context of “funding shortfalls and rising demand/costs”, as well as “unexpected increases” in NICs and NLW, which have “significantly increase costs for councils”.
Reeves’ actions are said to be directly impacting rate payers (Image: Getty)
The CCN added: “These findings on NICs impact on council budgets is in-line with analysis by the Local Government Association (LGA), which estimates there will be a £637million increase in direct NICs costs, and a further £1.13billion increase in indirect costs.
“It is therefore clear that given this evidence, the funding that is being made available for local government of £515million will fall well short of the amount required, adding significant pressure on services, particularly in the social care sector.”
An MHCLG spokesperson said: “Despite the inheritance we have been left, the government is focused on fixing the foundations of local government by rebuilding the sector from the ground up.
“We recognise the challenges that councils are facing, which is why we are providing an additional £2billion of grant funding to councils, including £502million to manage the impact of employer National Insurance Contributions (NICs) changes on council budgets.
“We are also maintaining a 5% threshold on council tax increases – the same level set by the previous administration – to protect taxpayers from excessive increases.”
