Experts claim households across the country are facing an increase in their council tax after Chancellor Rishi Sunak cut financial support for councils in his Spending Review.
Following an analysis of the review the Institute for Fiscal Studies (IFS) said bills may increase by £70 per household on average.
IFS director Paul Johnson said that in the review the Chancellor had given local authorities the ability to raise the tax by 5%, adding: “The chancellor has chosen to reduce support to local authorities and has given them the ability to raise Council Tax instead.
“If they do, and they’ll mostly probably need to, that will increase annual tax bills by an average of around £70 per household.”
Return to austerity
He added that the changes brought in by the review would seem ‘like a return to austerity’ for many people with the ‘pause’ in pay rises for 1.3 million public sector workers making it ‘a tougher time for some public services than expected’.
The Chancellor said he had been forced to make some tough choices and what he felt he couldn’t really do was to justify across the board pay rises in the public sector.
Because of the pandemic private sector wages have fallen as jobs have been lost, hours cut and workers furloughed, with a warning that unemployment could rise to 2.6 million next year. Front line NHS Staff and workers earning less than £24,000 may still receive a pay rise.
Widespread anger has been expressed by the public service unions at the Chancellors changes with threats being made of industrial action.
Mr Johnson commented that the Chancellor had picked a big fight ‘over not very much money’.
He said: “The decision to freeze public sector pay for some will probably save only between £1 and £2 billion next year.
The chancellor has perhaps picked a big fight over not very much money.
“And, as ever, in the public sector the decisions look driven by politics not by economics or the need to spend money either equitably or efficiently.”
In a separate report the Resolution Foundation has claimed the pandemic could shrink average pay packets by up to £1,200 a year by 2025.
Foundation chief executive Torsten Bell said: “The Covid crisis is causing immense damage to the public finances, and permanent damage to family finances too, with pay packets on track to be £1,200 a year lower than pre-pandemic expectations.”
In its report the Foundation said: ”The combined effects of weaker pay growth and higher unemployment will serve to prolong Britain’s living standards squeeze.
“The pandemic is just the latest of three ‘once in a lifetime’ economic shocks the UK experienced in a little over a decade, following the financial crisis and Brexit. The result is an unprecedented 15-year living standards squeeze.”