Sutton Council is set to introduce measures which will force some of the poorest in the borough, including the disabled and unemployed, to pay Council Tax for the first time.
Punchy proposal: Barry Lewis, Sutton’s council leader
It is an effort by the Liberal Democrat-controlled council under leader Barry “Basher” Lewis to deal with the financial pressures of the soaring costs of providing housing and social care which are pushing local authorities across the country to the brink of bankruptcy.
Croydon and Sutton are among 31 of the 32 London boroughs expected to increase Council Tax in April by the maximum allowed – 4.99% (the 32nd borough, Newham, has asked for permission for a 10% Council Tax hike to avoid going bust). For Croydon residents, the 5% increase this year will mean that their Council Tax bills have risen 27% since 2023 under Conservative Mayor Jason Perry.
With the new Labour government of Keir Starmer, Rachel Reeves and Steve Reed unable, or unwilling, to provide a resolution to the financial crisis in local social services, councils are getting increasingly desperate to find ways of plugging their budget black holes.
Even then, it doesn’t always work.
In this financial year, 2024-2025, Croydon is predicting an overspend of more than £20million. For 2025-2026, the predicted overspend is a staggering £83million.
Unsustainable: Croydon Mayor Jason Perry
“Given the significant forecast overspend in the current year, the estimated budget gaps for 2025-2026 onwards and the possible use of earmarked reserves in the current year, the council remains financially unsustainable without significant government support,” Tony McArdle, the chair of the government-appointed Croydon improvement panel, wrote to the government in late November (the italics are ours, for emphasis, since the message of doom does not appear to have got through to Mayor Perry, who continues to claim that he is somehow “fixing the finances”).
The innovative/desperate (delete as appropriate) measures being adopted elsewhere in London includes some councils, such as Sutton, looking to amend their Council Tax relief schemes.
Boroughs have set their own Council Tax reduction schemes since 2013. The amount of help they provide to poor pensioners is refunded by the government but councils have to fund the exemptions to working-age residents from their own resources.
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Sutton wants to make every household – other than the poorest pensioners – to pay at least 5% of their Council Tax bill.
“A survey of other London boroughs has found that 15 local authorities (just under half of all London boroughs) are looking to make changes to their Council Tax reduction scheme in 2025-2026 to help address the financial challenges faced by the majority of London boroughs,” an official report to Sutton councillors says.
Sutton spends £14.5million per year on its Council Tax exemption scheme – £9.5million for about 7,700 working-age households and the remainder on pensioner households.
The council report says that it will move to a “more targeted scheme”, but what they really mean is that they are reducing the cost of the scheme.
This includes capping the discount available at the Band C Council Tax rate and removing the 100% exemption, “meaning every household will pay at least 5% Council Tax, including those out of work and on a disability benefit” – so hitting those who can least afford it.
There will be no changes to Croydon’s Council Tax support scheme. Changes would require a statutory consultation, and Mayor Perry and the council chief executive, Katherine Kerswell, have left it too late to do that for this year.
Many boroughs remain concerned that Chancellor Rachel Reeves won’t reimburse them for the impact in the increase in employers’ National Insurance contributions and the increase in the London Living Wage.
Some councils have suggested that the increase in the London Living Wage, from £13.15 to £13.85 an hour, “will trigger adult social care pressures for councils”, in addition to an annual 2.5% pay rise for council staff.
Budget issues: Chancellor Rachel Reeves’ November statement has caused concerns for councils across the country
And meanwhile, Sir Sadiq Khan, the Mayor of London, is announcing his own proposals for the Greater London Authority’s share of your Council Tax, the “precept”, which is reported likely to be increased (for Band D Council Tax properties) from £471 to £490 a year.
The precept helps to pay for London’s police and fire services.
Even that increase is reckoned to be inadequate to cover the Metropolitan Police’s budget shortfall – in December last year its commissioner Sir Mark Rowley said the force – with its additional demands to provide national services in security, crowd control around Parliament and anti-terrorism – needed an additional £450million. The government is providing £208million, and increase of £65million on its International Capital Grant.
“The last thing I want to do is increase Council Tax at a time when many household budgets are stretched,” Sir Sadiq told the BBC yesterday.
“But keeping Londoners safe is my top priority as Mayor and I’ll always do everything I can to ensure the Met Police and the London Fire Brigade have the funding they need.”
The increase is expected to raise an additional £54million in the police budget for 2025-2026.
“The Met is still facing a budget shortfall due to over a decade of damaging real-terms cuts by the previous government. That’s why I’m stepping in to provide an additional £54million, which will help to keep neighbourhood police officers on the streets and bear down on violent crime and robbery,” Sir Sadiq said.
The Mayor also announced that £147.5million of funding would be set aside in his draft budget to fund his pledge of universal free school meals across all of the capital’s state schools.
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