Real-terms cut in Council Tax for fourth year
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
New official figures show that the average Council Tax bill in England has fallen in real-terms for the fourth year.
New official figures show that the average Council Tax bill in England has fallen in real-terms for the fourth year, as almost two-thirds of town halls have taken up the government’s freeze offer, Local Government Secretary Eric Pickles announced today (26 March 2014).
National statistics released today reveal that the average band D Council Tax level from this April to be £1,468, or a change of just 0.9%, 1 of the lowest changes ever and a cut in real-terms. In London, Council Tax bills have fallen in cash terms by 0.4%.
By comparison, in Wales, which has not used Barnett funding to make a similar freeze offer, average bills are rising by twice the rate of inflation.
Since 2010, the government has worked with local authorities to reduce Council Tax. This has cut average bills in England over 4 years by over 11% in real-terms. In contrast the period between 1997 and 2010 saw Council Tax increase in real-terms by 47%. This doubled a typical band D bill to a £120 a month.
The coalition government has provided funding for an unprecedented 5 years of Council Tax freezes worth potentially up to £1,075 for an average band D home over the lifetime of this Parliament.
Mr Pickles also praised those councils that froze or reduced their bills for understanding the importance of keeping tax bills down and for giving families greater financial security.
In total 251, or 60%, of local authorities signed up to the government offer to freeze Council Tax for 2014 to 2015. This is roughly the same as last year. The government has also handed local residents new rights to veto any excessive local tax hikes through a referendum. No council chose to put an increase to a local referendum.
Residents are also now able to pay their bill over 12 months rather than 10 to help spread the cost. From April, a new national Council Tax discount for family annexes also comes into effect, designed to support extended families and remove an unfair penalty tax surcharge on annexes.
Local Government Secretary Eric Pickles said:
In the last decade, Council Tax bills went through the roof. This government has been working to keep Council Tax down, giving hard-working people greater financial security.
We have given extra government funding to town halls to help freeze Council Tax, which has cut bills by more than 11% in real-terms.
This means people have more in their pocket, and are no longer facing the threat of soaring bills.
See the list of councils (MS Excel, 17KB) that have opted to take part in the government’s 2014 to 2015 Council Tax freeze initiative. See changes in Council Tax by local authority 2014 to 2015 (MS Excel, 190KB).
In 1997 to 1998, average band D Council Tax in England was £688, by 2010 to 2011 it had increased to £1,439 an increase of 109%. Using the consumer price index Council Tax bills increased by 64% in real terms over this period. Using retail price index the comparative increase was 47%. This table (MS Excel, 1.47MB) shows the change in band D Council Tax over a 20 year period between 1993 to 1994 and 2013 to 2014 at national and local authority level.
The coalition government has provided total freeze funding of up to £5.2 billion up to 2015 to 2016, which is an unprecedented 5 years of Council Tax freezes worth potentially up to £1,075 for an average band D taxpayer over the lifetime of this Parliament. The table (MS Excel, 196KB) provides the potential financial savings in Council Tax (compared to an annual 5% increase) by English local authority.
Local authorities that freeze or reduce their relevant amount of Council Tax will receive a grant equivalent to a 1% increase on 2013 to 2014 band D Council Tax levels. The government has made available more than £800 million of grant in both financial years 2014 to 2015 and 2015 to 2016. The 2014 to 2015 indicative Council Tax freeze grant allocations table (MS Excel, 117KB) sets out how much each council is eligible for.
Council Tax levels remain a local decision. The government previously had the power to restrict Council Tax rises through a centrally dictated cap. This government has scrapped that through the Localism Act, which also created a new power for local residents to veto excessive Council Tax rises instead through a local referendum. The referendum threshold approved by Parliament in 2014 to 2015 is 2.0% and strikes an appropriate balance between direct democracy and representative democracy. Following Royal Assent of the Local Audit and Accountability Act 2014, the referendum threshold includes levies, which therefore means the principle now relates to the actual increase which appears on people’s bills. No referendums were triggered.
The consumer price index shows a real-terms decrease of 9.1% over 4 years. When assessed against the traditional retail price index Council Tax has fallen by 11.1% in real terms.
From April 2014, funding for 2011 to 2012 and 2013 to 2014 freezes is now in the main local government settlement total for future years. Funding for the next 2 freeze years will also be built into the spending review baseline. This will give maximum possible certainty for councils that the extra funding for freezing Council Tax will remain available, and there will not be a ‘cliff edge’ effect from the freeze grant disappearing in due course.
Residents are also now able to pay their Council Tax bills over 12 months rather than 10 to spread the cost of bills and help with the cost of living while the government has also announced plans to remove an unfair Council Tax surcharge on family annexes and home improvements, worth £5.3 million of additional support to extended families.
The Welsh government are receiving Barnett consequential funding for a Council Tax freeze from the UK government but has chosen not to implement the policy.
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