Daily Junction.mobi portalPolitics · February 12, 2025 · Sarah Mitchell · 8 min
Local councils across England and Wales are implementing the maximum permitted 5% council tax increase for 2025-26, with social care precepts pushing bills to record highs. The rises come as councils warn of bankruptcy without emergency government funding to cover soaring demand for adult social care and children's services.
Council tax bills across England and Wales are set to rise by an average of 5% in 2025-26, with the typical Band D property paying £2,171 annually—up from £2,065 the previous year. The increases, which represent the maximum permitted under government rules, come as local authorities face an unprecedented funding crisis driven by soaring demand for social care, rising homelessness, and a decade of cuts to central government grants.
According to the Local Government Association (LGA), 95% of councils in England are implementing the full 4.99% increase, with social care authorities adding a further 2% adult social care precept. Some areas will see bills exceed £3,000 for Band D properties, while even Band A households—typically lower-income families—face increases of £70-100 per year.
The rises come despite warnings from the LGA that 26 councils are at risk of issuing Section 114 notices—effectively declaring bankruptcy—without emergency government funding. Birmingham City Council, the largest local authority in Europe, issued such a notice in September 2024, joining Croydon, Slough, Thurrock, and Woking in effective insolvency.
Local government funding in England has been hollowed out over 15 years of austerity and structural reform. Central government grants—which once covered the majority of council budgets—have fallen 27% in real terms since 2010, according to the Institute for Fiscal Studies (IFS). At the same time, demand for expensive statutory services has soared.
Adult social care is the primary driver. Councils spend £22 billion annually supporting elderly and disabled people with care needs, accounting for 40% of budgets in some areas. Demand has risen 18% since 2020 as the population ages and more people live with complex conditions like dementia. The cost of providing care has also increased, with care home fees rising 8-12% annually and a national shortage of care workers pushing up wages.
Children's services are the second major pressure point. Councils now spend £12.7 billion annually on child protection, looked-after children, and special educational needs (SEND) support—up 42% since 2019. The number of children with Education, Health and Care Plans (EHCPs) has doubled since 2015, and councils face a legal duty to provide support regardless of cost. Many councils report SEND budgets running £50-100 million deficits.
Homelessness has also surged, with councils spending £1.6 billion annually on temporary accommodation—triple the 2010 figure. The number of households in temporary accommodation hit 117,000 in 2024, the highest since records began, driven by the end of eviction bans, rising private rents, and a shortage of social housing.
Meanwhile, inflation has driven up the cost of everything from energy to waste collection. The 2022-23 energy crisis alone added £3 billion to council costs, and while prices have moderated, they remain well above pre-pandemic levels.
Faced with falling grants and rising costs, councils have become increasingly reliant on council tax. In 2010, council tax funded 28% of local authority budgets; by 2025, it accounts for 51%, according to the LGA. This shift represents a fundamental change in how local services are funded, moving from progressive central taxation (income tax, VAT) to regressive local property taxes that hit lower-income households harder.
The government caps annual council tax rises at 4.99% without requiring a local referendum. Social care authorities—county councils and unitary authorities responsible for adult and children's services—can levy an additional 2% adult social care precept, bringing the total to 6.99%. This precept, introduced in 2016, was meant to be a temporary measure but has become permanent.
For 2025-26, the average Band D bill in England is £2,171, but there is significant regional variation:
In Wales, where councils have more flexibility, some authorities are raising council tax by 8-9%, with Blaenau Gwent implementing a 9.5% rise—the highest in the UK.
Despite maximum tax rises, most councils are making significant cuts to balance budgets. The LGA estimates councils face a £6.2 billion funding gap by 2026-27 even with tax increases and efficiency savings.
Non-statutory services—those councils are not legally required to provide—are being slashed:
Even statutory services are being rationed more tightly. Adult social care now operates on a high-threshold model, with only those with "substantial" or "critical" needs receiving support. Councils are also reducing spending on preventative services like day centres and community support, which can lead to higher costs later as people's conditions deteriorate.
The funding crisis has become a major political battleground. The Local Government Association, which represents councils of all political stripes, argues that £10 billion in additional annual funding is needed to stabilize services and clear the social care backlog.
The Labour Party, which controls most urban councils, blames 14 years of Conservative austerity for the crisis. Labour-led Birmingham's bankruptcy was triggered by equal pay claims and an IT disaster, but underlying funding pressures made the council vulnerable. Labour has pledged to reform local government finance if elected, including revisiting the council tax system and increasing central grants.
The Conservative government argues councils need to improve efficiency and prioritize core services. Ministers point to councils with large reserves or ambitious capital projects as evidence of poor financial management. However, the LGA counters that reserves are often earmarked for specific purposes (like school maintenance) and cannot be used for day-to-day spending, and that capital projects are funded separately through borrowing.
The Liberal Democrats and Greens, who control many county and district councils, support calls for a fundamental review of local government finance, including replacing council tax with a proportional property tax based on current values (council tax bands are based on 1991 property values, creating significant distortions).
For households, the 5% council tax rise comes on top of other cost-of-living pressures. Energy bills, food prices, and mortgage costs have all risen sharply since 2022, and while inflation has moderated, prices remain well above pre-pandemic levels.
Council tax is particularly regressive because it is based on property values from 1991, which bear little relation to current wealth or income. A Band D property in Hartlepool (average value £150,000) pays a similar council tax to a Band D property in Oxford (average value £450,000), even though the Oxford household is likely far wealthier.
Low-income households can apply for Council Tax Reduction (formerly Council Tax Benefit), which can reduce bills by up to 100% depending on income and circumstances. However, take-up is low due to lack of awareness and the complexity of the application process. Around 2.1 million households receive support, down from 5.9 million under the old Council Tax Benefit system.
Pensioners, who make up a large share of council tax payers, are particularly affected. While the state pension has risen under the triple lock, many pensioners on fixed incomes struggle with rising bills. Some councils offer hardship funds or payment plans, but these are discretionary and vary widely.
When a council cannot balance its budget, the chief finance officer (Section 151 officer) is legally required to issue a Section 114 notice, which effectively freezes all non-essential spending. The council must then produce a recovery plan, often involving severe cuts, asset sales, and government intervention.
Birmingham's Section 114 notice in September 2024 was the most high-profile, but it followed similar crises in:
The LGA warns that 26 more councils are at risk of Section 114 notices without emergency funding, including several county councils facing social care cost pressures.
Several reforms are under discussion:
![[View image]](/img/council-tax-rises-2025-england-wales.jpg){kind=link}