Council tax could rocket up to 75% as Labour 'bails out Birmingham'

The IFS warned that some councils could face increases of up to 75% (Image: Getty)

Council tax bills could rise sharply in parts of England as the Government plans to make major changes to the local authority funding system, redirecting funding towards the most deprived areas. Under the reforms, central Government support will be shifted away from councils considered better off and towards those facing greater social and economic pressures in an attempt to make the country's funding model fairer. However, the Conservatives have criticised the changes, claiming the Government is seeking to "punish" low-tax councils and "moving funding to badly-run Labour councils that spend irresponsibly."

Shadow local government secretary Sir James Cleverly added: "Inevitably, councils that lose out will be forced to cut services or raise tax - and with referendum principles scrapped, those hikes will be big." Six London councils (the City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, Westminster, and Windsor and Maidenhead), which currently have some of the lowest council tax rates in the country and are facing funding reductions, will be allowed to raise bills beyond the usual 5% annual cap for the next two years.

Core spending power in Birmingham is projected to rise by over 45% by 2028–29 (Image: Getty)

The Government confirmed the changes on December 17 with the publication of its provisional Local Government Finance Settlement, setting out funding allocations for English councils over the three-year period from 2026–27 to 2028–29.

This annual settlement outlines funding allocations for local authorities and is subject to approval by the House of Commons. Following the consultation, the final settlement for 2026–27 will be published in early 2026.

The Institute for Fiscal Studies (IFS) has highlighted that some London councils, notably Wandsworth and Westminster, could see council tax rises approaching 75% if they fully utilise their capacity to increase bills.

While some areas face rising bills, others stand to gain substantially from the overhaul. Councils projected to see some of the largest increases include Birmingham, Bradford, Barking and Dagenham, Coventry, Derby, Enfield, Hounslow, Luton, Manchester, Newham and Slough, The Daily Mail reported.

Birmingham, which has struggled financially in recent years, is among the biggest beneficiaries, with its “core spending power” expected to be around 45% higher by 2028–29.

English councils will receive £78 billion next year to fund essential services under a new multi-year settlement running until 2029.

The Minister for Local Government and Homelessness, Alison McGovern said on Wednesday: "This change will improve fairness, as taxpayers in those councils have the lowest bills in the country, and this year paid up to £1,280 less than the average council taxpayer.

"It will enable the Government to allocate more than £250 million of funding in the system more fairly, instead of subsidising bills for the half a million households in those council areas.

"It will also provide greater flexibility for those authorities in deciding how to manage their finances following our reforms. The councils will decide on the level of council tax increase to set and whether to draw on the relatively high alternative sources of income from which a number of them benefit."