Council tax rises expected to cancel out Budget national insurance cut

Council tax rises expected to cancel out Budget national insurance cut

Expected rises in council tax will wipe out any benefit felt by households from the cut to national insurance announced in the Budget, figures suggest.

A forecast by the Office for Budget Responsibility (OBR) shows council tax receipts in England are expected to rise from £38.7 billion in 2023-24 to £50.4 billion in 2028/29, an increase of £11.7 billion.

This compares with receipts totalling £10.7 billion which the OBR expects to be generated over the same period by the 2% cut to national insurance announced by Jeremy Hunt on Wednesday.

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Labour leader Sir Keir Starmer has accused the Government of deceiving taxpayers (Dan Kitwood/PA)

This suggests that overall any benefit of the cut to national insurance, which the Chancellor claimed provided clear evidence that the Government is committed to reducing the tax burden, will be cancelled out by council tax hikes.

Presenting the Budget, Mr Hunt argued low taxes are key to driving growth and said the national insurance cut would hand an average employee an additional £450 a year.

Speaking in the Commons, Sir Keir Starmer accused the Chancellor of deceiving taxpayers.

He said: “They recognise a Tory con when they see it, just as they did in November — give with one hand and take even more with the other.

“People have been living through this nonsense for 14 years. They know that the thresholds are still frozen, dragging more and more people into higher taxes.

“They know that a Tory stealth tax is coming their way in the shape of their next council tax bill. The Levelling Up Secretary has told not just this House but every house in the country that he is coming for their council tax —give with one hand, Gove with the other.”

Liberal Democrat local government spokesperson Helen Morgan said: “This Conservative Government has starved councils of money and failed to fix social care, meaning families end up picking up the tab with years of council tax hikes.

“It is just another sign that Conservative ministers are giving with one hand and taking back more with the other, leaving people feeling worse off and struggling to get by.”

Council rises are set by local authorities, but the Government sets limits on annual increases.

National insurance rate for UK employees
(PA Graphics)

The Government currently permits increases of 4.99% without requiring a local referendum.

The Treasury has been approached for comment.