Council tax rises will cancel out national insurance cut, Labour claims

Labour estimated that the levy for a typical Band D household will rise to £2,168 in 2024-25, up £420 over the course of the parliament
Labour estimated that the levy for a typical Band D household will rise to £2,168 in 2024-25, up £420 over the course of the parliament - JEREMY WALKER/STONE RF

Council tax rises on the Tories’ watch are set to wipe out savings from cuts to national insurance, Labour has claimed.

In his autumn statement, Chancellor Jeremy Hunt slashed the levy on working people by two percentage points as he hailed the “biggest package of tax cuts to be implemented since the 1980s”.

But a Labour analysis has found the benefit will be almost completely outstripped by the increase in council tax since the last general election, as the Conservatives give local authorities the go-ahead to hike their bills further.

The party estimated that the levy for a typical Band D household will rise to £2,168 in 2024-25, up £420 over the course of the parliament.

By contrast, the Government has said the national insurance cut will save the average salaried worker £450 this year.

The analysis is based on projected tax rises across all councils, assuming they hike their bills by the new maximum rate set by Mr Hunt in November.

It is expected that the vast majority will put up the levy by as much as they can.

Labour is laying the blame firmly at the Tories’ door, claiming the Government has given councils the green light to raise taxes during a cost-of-living crisis.

Darren Jones, Labour’s shadow chief secretary to the Treasury, said: “Rishi Sunak’s claim to have cut taxes is yet another broken promise from this failed Conservative government.

“Any money families might have got from the national insurance cut is being wiped out from the hike in council tax that this Tory government are imposing on councils.

“The truth is that after 14 years of Conservative government, working people are worse off. There is nothing Rishi Sunak can do to distract from that record of failure. It’s time for a change.

“Only Labour has a long-term plan for our economy that will deliver more jobs, more investment and put more money in people’s pockets.”

In their 2019 manifesto, the Tories pledged to keep a veto on large council tax rises, insisting local people would “continue to have the final say”.

But Mr Hunt decided in November that councils needed more flexibility to raise money for social care, hiking the rate at which they can increase their bills to 5 per cent.

Tax hikes

He also told police forces they can increase their charges by as much as £15, with fire brigades allowed to add another £5.

In 2019-20, the average Band D council tax set by local authorities was £1,750. This had risen to £2,065 by 2023-24, and – by Labour’s estimate – will increase again to £2,168 in 2024-25.

The analysis does not take freezes to income tax and national insurance thresholds into account.

Tory chairman Richard Holden, said: “It’s councils that are responsible for setting the level of council tax and that includes the Labour-run bankrupt Birmingham council, who have had to hike council tax rates up by a staggering 21 per cent.

“If Labour can’t be trusted to run a local authority, they certainly can’t be trusted to run our country – especially with their dangerous 2030 decarbonisation promise which they said themselves will cost £28 billion annually. With no plan to pay for it, families and hardworking people will be forced to fork out one thousand pounds more in tax every year.

“Only Rishi Sunak and the Conservatives have a plan which is working, with inflation more than halved, taxes cut, wages starting to rise and mortgage rates starting to fall. We must stick to the plan because that way we will build a stronger economy which means a brighter future for all.”