# Council Tax Rises Hit 5% Across England and Wales as Local Authorities Face Funding Crisis

> 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.

*Section: Politics — By Sarah Mitchell — Published February 12, 2025 — 8 min read*

Canonical URL: https://dailyjunction.org/politics/council-tax-rises-2025-england-wales
Tags: council tax, local government, social care, council funding, local services, UK politics

## 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

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.

## The funding crisis explained

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.

## Council tax: from supplementary to primary funding source

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:

- **Rutland**: £2,449 (highest in England)
- **Nottingham**: £2,384
- **Dorset**: £2,312
- **Westminster**: £871 (lowest, due to high commercial property tax base)
- **Wandsworth**: £982 (historically low-tax borough)

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.

## What councils are cutting

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:

- **Libraries**: Over 800 libraries have closed since 2010, with a further 150 closures planned for 2025-26. Many remaining libraries are reducing opening hours or moving to volunteer-run models.
- **Youth services**: Funding has fallen 70% since 2010, with youth centres, detached youth work, and early intervention programmes cut or eliminated.
- **Bus subsidies**: Councils have cut £200 million from supported bus routes since 2010, leaving rural and evening services unviable.
- **Parks and green spaces**: Maintenance budgets have fallen 45%, with some councils transferring parks to community groups or allowing them to deteriorate.
- **Public toilets**: Over 1,000 public toilets have closed, with many councils exiting provision entirely.
- **Arts and culture**: Funding for museums, theatres, and cultural events has been cut by 40% on average.

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 political debate

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).

## The impact on residents

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.

## Section 114 notices: the bankruptcy process

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:

- **Croydon** (2020): Issued three Section 114 notices due to risky property investments and overspending. Now under government-appointed commissioners.
- **Slough** (2021): Accumulated £760 million in debt through commercial property investments. Sold assets and cut services under government oversight.
- **Thurrock** (2022): Lost £469 million on solar farm investments. Government commissioners took control.
- **Woking** (2023): Ran up £2.6 billion in debt (£100,000 per resident) on failed regeneration projects. Under government control.

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.

## Potential reforms

Several reforms are under discussion:

1. **Social care funding reform**: The government's 2021 plan to cap lifetime care costs at £86,000 was delayed to 2025, then scrapped. Without reform, councils will continue to bear unlimited liability for care costs.

2. **Council tax revaluation**: Updating property bands to reflect current values could raise revenue and improve fairness, but would create political winners and losers. No government has attempted revaluation since 1991.

3. **Business rates reform**: The current system is outdated and penalizes high-street retail. Reforms could shift the burden to online retailers and warehouses, raising revenue for councils.

4. **Devolution deals**: Combined authorities with elected mayors receive additional funding and powers, but coverage is patchy and excludes many areas.

5. **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.

## Frequently asked questions

### Why is council tax rising so much in 2025?

Council tax is rising because local authorities face a perfect storm of financial pressures: soaring demand for adult social care (up 18% since 2020 due to an ageing population), rising costs for children's services including special educational needs support (up 42% since 2019), increased homelessness requiring temporary accommodation, and inflation driving up costs for everything from energy to waste collection. Meanwhile, central government grants have fallen 27% in real terms since 2010. The government caps annual increases at 4.99% (with an additional 2% social care precept for some councils), forcing councils to choose between raising taxes to the maximum or cutting services.

### Can I challenge or refuse to pay the council tax increase?

No, you cannot legally refuse to pay council tax increases set by your local authority. Council tax is a legal obligation, and non-payment can result in court action, bailiff visits, and deductions from wages or benefits. However, you can challenge your council tax band if you believe your property is incorrectly valued—contact the Valuation Office Agency (England/Wales) or Scottish Assessors. You may also qualify for Council Tax Reduction (means-tested support), single person discount (25% off), disability reductions, or exemptions for students, care leavers under 25, or severely mentally impaired individuals. Contact your council's revenues team to check eligibility.

### What services will be cut despite council tax rises?

Even with maximum tax rises, most councils are cutting non-statutory services to protect legally required services like child protection and adult social care. Common cuts for 2025-26 include: closure of libraries, community centres, and public toilets; reduced frequency of bin collections and street cleaning; cuts to bus subsidies and concessionary travel schemes; closure of children's centres and youth services; reduced road maintenance and pothole repairs; and cuts to arts, culture, and parks funding. Some councils are also reducing opening hours at civic buildings, selling assets, and outsourcing services. Statutory services like social care are protected but often rationed more tightly.

## Sources

- [Local Government Association — Council Funding and Council Tax 2025-26](https://www.local.gov.uk/)
- [Ministry of Housing, Communities and Local Government — Council Tax Statistics 2025](https://www.gov.uk/government/organisations/mhclg)
- [Institute for Fiscal Studies — Local Government Spending and Funding](https://ifs.org.uk/)
- [County Councils Network — Social Care Funding Crisis Report](https://www.countycouncilsnetwork.org.uk/)

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