Council tax bills could increase £205 by 2019, warns think-tank

Average council tax bills for Band D properties could rise by £48 in April and a total of £205 by 2019 thanks to the local government funding settlement announced on Thursday, an independent economic think-tank has calculated.

With town halls given the power to charge up to 2% extra to pay for adult social care, council tax bills could rise by 4% a year without triggering a referendum of residents - up from the current limit of 2%, said the Institute for Fiscal Studies in a new study. And the final increase could even top £205 because of potential additional rises to help pay for police and fire brigades.

But the "fairly significant" increases expected will still leave council tax lower in 2019 than it was in 2010, once inflation is taken into account, thanks to the lasting impact of five years in which most councils imposed a freeze on bills.

The IFS said the settlement announced by Communities Secretary Greg Clark amounts to an average 8% reduction in local authorities' spending power in the period up to 2019/20 - much less painful than the 25% cuts experienced under the coalition government from 2010-15.

However, the cuts will be "front-loaded", with the majority of the impact (4%-5%) felt as early as 2016/17.

Poorer communities, which are most dependent on central government support, will be hardest hit, with an average 9.2% cut in funding. This compares with average 6.8% reductions for those which are least reliant on grants and most able to raise their own funds through business rates and council tax.

As a result of Thursday's settlement, the amount which councils receive in central grants from the Department for Communities and Local Government will fall by 60% over the next four years. But this will be offset by moves to allow town halls to retain more of the business rates and council tax which they raise.

The cuts will be more evenly spread than under the coalition, when the areas most dependent on grants saw their spending power fall by almost 40%, while cuts for those less reliant on central funding were close to 15%, said the study's authors David Innes and David Phillips.

The protection being provided for adult social care will put pressure on other council services, like children's social services, refuse collection, libraries, transport, economic development, planning and housing, some of which have already seen very large cuts.

A real-terms freeze in spending on adult social care would mean cuts of around 12% to other areas by 2019/20, requiring council chiefs to make "difficult choices", said the report. And every additional 1% increase in adult social care spending would require additional cuts to other areas of spending of around 0.5%.