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1. Multi-year settlements: Councils currently receive one-year funding settlements, making long-term planning impossible. Multi-year deals would improve certainty.

Conclusion

The 5% council tax rises for 2025-26 reflect a local government sector in crisis. Councils are caught between soaring demand for social care and other statutory services, and a funding model that has shifted the burden from central grants to local property taxes. Without significant reform—either through increased central funding, social care reform, or a complete overhaul of local government finance—the cycle of annual tax rises and service cuts will continue, with the most vulnerable residents bearing the brunt.

For now, residents face higher bills and reduced services, while councils warn that even these painful measures may not be enough to stave off bankruptcy. The question is not whether local government finance is broken, but how long the current system can limp on before fundamental reform becomes unavoidable.

Key takeaways

• 95% of English councils are implementing the maximum 4.99% council tax rise for 2025-26, with social care authorities adding a further 2% precept
• The average Band D property will pay £2,171 annually, up from £2,065 in 2024-25, with some areas exceeding £3,000
• Local Government Association warns 26 councils are at risk of effective bankruptcy (Section 114 notices) without emergency funding
• Adult social care demand has risen 18% since 2020, while government grants have fallen 27% in real terms since 2010
• Council tax now funds 51% of local authority budgets, up from 28% in 2010, shifting the burden from central to local taxation

Sources

• Local Government Association — Council Funding and Council Tax 2025-26
• Ministry of Housing, Communities and Local Government — Council Tax Statistics 2025
• Institute for Fiscal Studies — Local Government Spending and Funding
• County Councils Network — Social Care Funding Crisis Report

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