Council tax was only mentioned once by Jeremy Hunt in his almost hour-long speech setting out his awaited autumn statement on Thursday (November 17). But buried in a document published later which details the changes to public spending and taxation was a line that many local leaders had been dreading.
Local authorities will be allowed to raise council tax by 5 pc from April. Speaking in Parliament, the Chancellor described this simply as 'flexibilities' which will help put another £7.5bn into social care over the next two years.
Ultimately, it's up to each individual authority to decide if they raise council tax and if they use the maximum increase available to them without a referendum. But faced with multi-million-pound budget gaps, unless government funding increases in line with inflation, some town halls say they'll have little choice.
In Greater Manchester, council leaders say the government is relying on local authorities to raise their taxes to fund essential services such as social care. Manchester council leader Bev Craig said that this means that more money will be taken out of the pockets of Mancunians during the cost of living crisis.
"The Chancellor thinks the only fair way of funding the universal services that we all rely on is taking that out of the pockets of ordinary people," she said. "Councils now have to make the difficult decision as to how they balance the books."
Less than a third of Manchester town hall's budget comes from council tax. Its Labour leader says the whole council tax system is 'fundamentally unfair' because poorer areas like Manchester cannot collect as much money from it.
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For example, every 1 pc increase raises around £2m in Manchester, while Surrey - where Mr Hunt is an MP - would raise £8.3m, Coun Craig explains, citing analysis from the Labour Group of the Local Government Association. This is because council tax is calculated according to property values set in the 1990s with households which were the least valuable paying the lowest rate.
In Greater Manchester, nearly two thirds of households are classed in the lowest two bands of council tax which means that less money is collected. And of the money that is owed in council tax, as little as 90 pc is actually collected in places like Manchester where more people struggle to pay.
The 'double whammy', as one Labour source puts it, is that people in poorer parts of the country often require more services from their local authorities.
"This isn't just a Manchester problem," Coun Craig said. "This is a problem that poorer areas - predominantly in the North of England, predominantly Labour councils - are less able to collect as much money through council tax."
Manchester council faces a financial shortfall of £96m over the next three years, according to the latest forecasts which assume a 3 pc council tax rise. Like many local authorities across the country, it will have to find savings in its annual budget which is £428m smaller since austerity saw funding slashed.
The biggest cuts will be to social care with savings totalling more than £10m. It comes as the country faces a social care crisis which several successive governments have failed to fix while costs continue to increase every year.
Speaking at a council meeting earlier in the week, Labour councillor Thomas Robinson expressed his 'rage' that support for some of the most vulnerable residents in the city would be funded by raising 'regressive' council tax.
Responding to the autumn statement, Greater Manchester mayor Andy Burnham said the funding public sector pay rises also remains unresolved. The metro mayor, who has the power to set his own precepts for police, fire and other services, said that this will put even more pressure on council tax.
Last year, Wigan council had to end a seven-year freeze on the main part of its council tax bill. By next year it will need to dip into its reserves for the first time. Labour councillor Nazia Rehman, who is responsible for the budget, says despite 'careful financial management', the rainy day they feared is here. However, she says raising council tax is not the right way to plug the gap.
"Council tax increases impact most on the poorest sections of our communities", she said, "and local authorities like Wigan cannot be expected to raise huge amounts of money, compared to our more affluent counterparts.
"It is not the solution to long-term pressures and adds to the financial pressures facing households. It seems like the government is trying to force local authorities to find local solutions for national problems that we simply can't do."
Some say lifting the limit for council tax increases offers more flexibility. Bolton's Conservative council leader Martyn Cox says he and his Labour counterparts have called for more control over their budgets for years.
And while he wants more funding from central government, he refutes claims that council tax is unfair, saying that money always has to come from taxation. "I'm a believer in councils having as much flexibility over their funding," he said.
"It's incumbent on councils to keep any rises in council tax as low as possible. But I'm not going to campaign for more flexibility and then complain when we've got it."
The Tory leader said the autumn statement sees tax increases targeted at the better off, adding that councils do not need to raise tax if they do not want to. But earlier this week, mayor Paul Dennett said choosing whether or not to raise council tax is like 'a choice to obey a command with a gun at your head'.
As councils wait to find out how much funding they will receive from local government, leaders are reluctant to comment on their plans for next year. However, proposals set out before the autumn statement was announced showed a full 3 pc increase was already being considered in some boroughs. With the limit now lifted to 5 pc, councils will be under pressure to use it.
Speaking to the Local Democracy Reporting Service, one Labour source said: "With the current funding situation the way it is, it's going to be very difficult for councils not to accept the full council tax rise that the Treasury assumes. "It's going to be appalling for ratepayers, but these rises are going to be seen across the country – particularly hitting the poorest areas."
Local authorities must set their budgets, including council tax rates, by March.
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