Councils warn residents that large tax rises will be on the way as cost-of-living crisis bites

It is feared that the Band D home - often seen as the average - could see a bill above £2,000 for the first time, with households paying an extra £100.

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Prime Minister Rishi Sunak and chancellor Jeremy Hunt are preparing to lift the cap on council tax increases as part of the autumn budget statement on Thursday.

Local authorities could be allowed to raise council tax as much as 4.99 per cent without holding a local referendum - to help fund social care.

Currently, town halls cannot raise taxes past 2.99 per cent, with an additional one per cent levy for social care, without holding a referendum.

Councils across the country are expected to use this new threshold to charge residents more.

Councillor Peter Chegwyn, leader of Gosport Borough Council said that the potential council tax rise ‘is not good news for anyone’.

‘It’s welcome news for councillors but it’s bad news from householders because they’re all suffering from the cost of living crisis so the last thing they want to hear is tax increases.

‘I think councillors of all branches will welcome the easing a bit but it's half the rate of inflation so we’re going to have to find the extra money but so are households - it’s not good news for anyone.

‘Gosport is in a better financial position than many because we’ve adopted a very prudent financial strategy.

‘We’re better than say Hampshire County Council - that’s where the big increases will come in cash terms as the county council levies far more from council tax than the districts.’

Sean Woodward, leader of Fareham Borough Council said that the increase will not help the council ‘at all’.

‘Our council tax is only £3 per week for the average home - at the moment we’re allowed to add £5 per year.

‘Even the police and crime commissioner is allowed to add £10 per year which I thought would be reasonable for district councils as well.

‘We’ve just had to draw down a million pounds from reserves just to keep services going - things are really tough.

‘Sadly it will be the most efficient councils - of which Fareham is right up the top of the list - who will be disproportionately disadvantaged.

‘We would probably look at £10 per year like the PCC is doing - in terms of actual money, it’s a tuppence a day to be able to retain all our services.

‘If that’s what they do it will assist the great majority of councils in balancing the books but it won’t assist FBC.’

The news comes after a statement from the leaders of Hampshire County Council (HCC), and Kent County Council published yesterday calling on the government to help avert a financial ‘disaster’.

HCC is expecting a £200m budget black hole over the next four years.

In a letter to the prime minister, the leader of HCC, councillor Rob Humby said both councils are facing budget deficits ‘of a scale that has never been seen before’.

‘We have experienced more than 12 years of national austerity and cuts to our core budgets. Inflation continues to grow, along with demand for services such as social care for vulnerable adults and children.

‘Our budgets are now at breaking point.

‘We have gone as far as we can to close the budget gaps we have faced to date, and there is nowhere left to go in future without severely impacting some of the most vulnerable people in our society.

‘We cannot sit by and let two great counties sleep-walk into a financial disaster.

'Even with drastic cuts to services, we won’t be able to close our future budget gaps and based on current forecasts, our authorities would have no option but to consider formal talks with our auditors, DLUHC and Treasury over the coming months.’

Kent County Council Leader Roger Gough added: ‘The problem is simple, the extra money we can raise from council tax and business rates barely covers our normal costs of inflation each year. This leaves major growth, particularly in adults’ and children’s social care, unfunded. This is not a medium-term problem that can be fixed with more one-off handouts to keep the sector limping along, it needs fundamental changes to the whole system of local government funding. Without a major change either in the way these two services are funded, or in our legal obligations, I suspect large parts of upper-tier local government will face collapse.’

Councillor Gerald Vernon-Jackson, leader of Portsmouth City Council said he will have to see what the council ‘is allowed to do’.

‘I’m very conscious that council tax was designed as a tax to hit the poorest families the hardest and the richest families the least.

‘Council tax is a regressive tax and it was designed to target the poorest families by the Conservative government and that always makes me very worried about increasing council tax.

‘I don’t think there should be a feeling that councils should automatically increase the tax as much as possible.

‘My worry is that this will disguise the government cutting the amount of money that they give councils and expect councils to get that money back through tax rises.

‘For somewhere like Portsmouth and Gosport where people are not wealthy - that’s much more difficult than places like Winchester.

‘I don’t think that you should automatically assume that the council should increase council tax as much as possible - it might be that that’s where we get to because the pressures of adult and child social care are so great.

‘I would abolish council tax immediately and make it a tax which was based on what people could afford to pay because people with the broadest shoulders should pick up the biggest part of the bill.’