Wealthier regions of England are to lose funding as part of radical changes to local councils. Areas with the highest levels of deprivation, and those unable to collect high levels of council tax, will receive more money from central government.
Many are likely to be in the North and Midlands, with losers most likely to be in the South. Current rules that effectively ban authorities from increasing council tax by more than 5% each year will stay – but councils “facing significant local financial difficulty” will be allowed to apply for an exemption, as long as they currently charge below the national average. Local Government Secretary Steve Reed said: “We are reforming the funding system that led to regional divides, postcode lotteries, and substandard public services for too many people.”
But a charity set up by personal finance expert Martin Lewis warned that higher council tax bills could mean more people falling into debt.
Helen Undy, chief executive of the Money and Mental Health Policy Institute, said: “A 10% rise in council tax will hit many households hard, and could result in more people falling behind on bills.
“As things stand, they will then face a punitive process in which councils are demanding full repayment of their annual bill, piling on extra charges and sending the bailiffs in – all within six weeks of a single missed council tax payment.
“That causes huge distress and locks people in financial misery, and it doesn’t help councils recoup more money.”
In a paper setting out changes to the £69billion allocated to councils by central government each year, the Ministry of Housing, Communities and Local Government said: “A fairer system means that local authorities in the most deprived places will now see significant funding increases, enabling them to reinvest in services that local people rely on.
“While some local authorities will receive less government support, reflecting an assessment of their need, we will treat these authorities fairly by bringing changes in gradually over three years, and providing transitional funding to help them transform local services.”
The current complex system of ring-fenced grants, including £200million for councils to help residents stop smoking and £620million to provide school holiday activities, will be simplified.
Councils will also be allowed to keep all the extra council tax raised from new homes, to encourage them to allow construction.
