Council Tax Has a Hidden Crisis

Hinzugefügt: 2026-05-14

[00:00:00]Council tax is a mess. Just take a look at this for me. Between 2020 and this financial year across England, Scotland, and Wales, the average council tax bill has gone up by 30.8%. The equivalent of £565.14 added to the average council tax bill every year. But that is just an average.

[00:00:20]Cudden has seen the largest increase since 2020. It's gone up by about £815.81 on average. That's a 45.7% increase. But take just a short trip over to Wsworth and the increase there is only £228.39p.

[00:00:36]Okay, but what about the total amounts places pay? Dorset Council has the highest band council tax rate in England. But Westminster, the city of London and Kensington and Chelsea, home to politics, finance and some of the most expensive properties on Earth, all have some of the lowest total council tax rates in the country. All three of them are in the bottom five. How does one tax vary so much? Why are some poorer areas seeing massive increases in what they pay while some of the most expensive places to live on Earth are not? And most importantly, why does everyone's council tax bill just keep going up?

[00:01:12]>> By definition, council tax is a postco.

[00:01:16]>> It's not just what we pay that is a mess. The way council tax is calculated, too, is pretty odd. As you're probably aware, council tax is split into bands A to H. If you're based in Wales, there's also a band I. Those bands are based on property values, but not today's valuations. Instead, it's the values of homes from 1991 in England and Scotland or 2003 in Wales. This is why a 100 million Mayfair mansion can sit there in the same council tax band as a £500,000 semi- detached in Sulford. We just ignore everything that's happened basically to property prices since then.

[00:01:50]For houses built after 1991, rather than update all of the existing values, the powers that be over at the valuation office agency use a process called comparative valuation just to work backwards. If this new build shoe box made a paper mâe existed in 1991, we reckon it would be worth 70k. So that's a band D. Band D is the most important of the bands. It's called the standard reference point. Councils set their band D rate and every other band is then fixed as a percentage of that band by law. To add to the confusion, band can also vary within the local authority.

[00:02:22]So, here's Westminster, for example, who charge different rates depending on whether you live in Queens Park or Melia Square. Today, I'm going to focus on why bills are going up across the board, but I also want to give you a way to work out how much your bill has increased by.

[00:02:35]Council tax increases have become consistent, but the 30.8% rise since 2020 is broadly in line with inflation.

[00:02:43]So, technically, in real terms, the average bill hasn't exploded. It's mainly just kept up with general price increases, but that is an average bill.

[00:02:50]Of course, many areas have seen above inflation rises. So, my wonderful team have built this free tool. There's a link in the description for you. If you punch in your council, it will tell you exactly what you're paying, how much it's gone up by, and how you compare to everyone else. It's almost certainly going to make you feel mildly furious.

[00:03:05]So, if that's your sort of thing, the link is below. Also, while you're there, I did a survey recently to ask people who their favorite investment broker was. A lot of you rightfully pointed out that my methodology for this was a bit flawed. So, we put together a questionnaire instead to look at this in more detail. I'll also include a link for that if you fancy filling it out. No pressure. Anyway, back to the question at hand. Why is council tax going up every year at the minute? This really is a tale of two halves. The first is how local authorities fund their commitments and the second is what are those commitments? What are they paying for?

[00:03:36]Let's look at funding. First of all, >> it is a hard road, but we're getting there. The 2010s were the austerity decade and local authorities felt it hard. The IFS shows that local councils lost 26% of their funding per person in real terms over that period. These councils get their money really from three places. Central government grants, so money from government, from central government, council tax, and business rates. During the 2010s, those grants fell by 46% in real terms. So councils basically had two choices. Find the money somewhere else or cut services.

[00:04:12]This IFS table shows what got cut. And it's the stuff you probably notice most where you live. The poorest areas saw the biggest cuts overall. And this might partly explain why council tax is cheaper in places like Kensington and Chelsea. Wealthier areas often have stronger commercial economies. So this might look like a thriving high street, but commands higher business rates, which means there's less reliance on central grants in the first place. But austerity didn't mean council tax automatically went up. In fact, rises were capped by central government at 3.5% initially. Then that was reduced to just 2% per year. As a sweetener for this, between 2011 and 2016, the government ran a freeze scheme. Councils were offered a deal. Freeze your council tax and we'll compensate you with a grant worth a 2.5% rise each year. Most councils took this offer, but then they dropped that sweetener down to 1% from 2013. This was a bit of a political diddle really. So, central government cut council budgets and then offered those councils money not to whack up council tax bills because I imagine they knew it would have made voters furious if they saw their council tax bills going up a lot. But that freeze grant didn't really cover the shortfall.

[00:05:22]Around 40% of councils chose to reject the freeze and instead raise council tax around this time. So, at this point, taxes started to rise. The freeze came to an end overall from 2016 onwards. And at around the same time, the system changed again. A new adult social care cap was introduced on top of the pre-existing core cap. We've highlighted the difference with the dotted lines.

[00:05:43]These layers of caps allowed councils to raise different portions of their budget by different amounts and currently it's capped at a total increase of 5%. Which is why in recent years the bars on this table sit around the 5% mark. That's because of something called the referendum principle. So councils can only raise council tax above that limit if they hold a public vote. And I mean, who is going to do that, right? Imagine asking your local population, "Oh, do you want us to increase your taxes more?" So, what we see is most councils raising bills right up to the limit.

[00:06:14]Over 90% are doing this. Some councils in serious financial difficulty have been granted special permission to go higher than this. And we'll take a look at some of those cases towards the end of the video. But first, let's just take a look at this dummy Liverpool City Council tax bill for 2025 2026. It's not a real one, but it highlights what we need. So, the overall bill is up 5%, but Liverpool City Council's core charge only went up 2%. The thing about council taxes, what looks like one charge is actually several bundled together. Each one of these is called a precept. You've got Muryside Police up 7%, fire and rescue is on there, too. There's a mayoral precept, a social care precept.

[00:06:54]Each of these organizations sets their own increase. This is how your council can say we only put up our bit by 2% without technically lying. So that's the first half of our story really.

[00:07:04]Austerity starved councils of money and central government used an evershifting series of caps and freezes to influence how much council tax could go up.

[00:07:14]All of this also coincides with a period that we're in today where the funding for councils overall has increased. In 2024 25 funding was 10% higher in real terms than it was in 2019 2020 with bigger rises focused on deprived areas especially. So from a local council perspective, we're out of that austerity period. So why then aren't public services rapidly improving? Well, first of all, it takes time to recover from a decade of decline, right? But the bigger reason is the second half of this story.

[00:07:45]What is the money now being spent on?

[00:07:47]Take a look at how£1 of council tax was spent in the decade between 2010 and 2020. I will show you the modern numbers in a moment. And it is worth noting when this was made. The final year here is an estimate, but it's the way the costs have evolved over this 10 years that matter. Look at how social care went from 41p of every pound spent to 57p in every pound spent. The social care that's paid for by local councils is a cost that has been rising really fast.

[00:08:15]I'll give you some examples of the increases and what these costs do and don't include. The first one, adult social care. So this is older people in residential care homes plus working age adults with learning disabilities and physical disabilities and mental health needs for councils responsible for this portion of care. This is the single biggest cost currently. Second are child services. So this is foster care, child protection and residential placements for kids who can't safely live with their own families in children's residential care specifically. There has been a massive increase. So in 201819 councils in England paid for around £120 children's placements which cost around £10,000 a week or potentially more. But by 2022 2023 it was over £1,500.

[00:08:59]Most children's homes used to be run by councils or charities. They're now typically run by the private sector and most of the largest providers are private equity firms. So when a child needs an emergency placement tonight, you know, they need somewhere to live.

[00:09:14]The council often has very little bargaining power with these organizations. The competitions and market authority found that these providers are making profit margins of around 20% or over. The crucial thing about all of this social care cost is that under the care act of 2014, councils are legally required to fund this care. And that's just social care.

[00:09:32]There are other areas of pressure on local council budgets that are exploding. In 201516, homelessness took up 18% of council's housing budgets. By 2324, it was 60%. There are now over 134,000 households in temporary accommodation, including more than 176,000 children, which is the highest on record. And just to be clear, this is not asylum accommodation. So, asylum seekers are housed centrally by the Home Office. The families in council temporary accommodation are mostly UK residents who have been priced out of the rental market. So even when councils are getting more money like they are at the minute, more of it is being swallowed before it ever reaches the visible stuff that people associate with their council tax bill, libraries and bin collection. Here is the latest expenditure breakdown from my local council. This is total spending, not just council tax, but it shows the direction of travel. So today roughly 65% of my local council's budget is going on social care. And I'm not including protecting your health and well-being in that figure. So between 2010 and 2025, it's gone from 41p in the pound to 65p in the pound. Now, I do live in a seaside town with lots of older people. Lots of people come here to retire. It's near the beach. It's nicknamed God's waiting room. But this is not just my local council being unusually care heavy. The IFS estimates that adult and acute children's social care now account for around 65% of council's non-education spending in England, up from 50% in 2010. There will of course be areas in the UK that have a different picture to that might be another reason that bills can be lower in places like Kensington beyond just business rates funding things. Adult social care is means tested and to be blunt, most people in these areas are wealthy enough not to qualify. Wealthier areas also tend to have lower demand for council funded social care services whereas poorer areas tend to have a higher demand for those services. I want to be really clear at this point and say I'm not saying funding social care is a bad thing. I have a child in my immediate family who receives extra support in schools because of this type of funding. And I want the elderly people in our communities, the people who literally built the place, the country that I live in, the place I call home to have dignity and a proper level of care in retirement. My point is that I think that most people don't realize that this is what their council tax is increasingly paying for. The fire service, police, bin collections, libraries, street lights, all that visible stuff comes after this care element by law. And that means we can end up living in communities where obvious decline sits there in front of us and we wonder, why am I paying more council tax than ever before? And that thing right there is not fixed. This is Southport Pier. It's a 1 km long pier.

[00:12:12]It's a lovely walk on a sunny day, but it's been shut since 2022 because it's needed 20 million pounds of repairs.

[00:12:19]There has recently been a promise from central government to fix this or to fund the fixing of this, but prior to that, the local council said they couldn't afford to fix it. Probably because 65% of their budget is committed to social care. But because the pier is shut, fewer people visit Southport. This is one of the main tourist attractions of this place, right? So, local businesses struggle and some of them close in the area. Then the council gets less business rates because of this. So there is even less money then to fund the social care. Then you either cut or you increase council tax. You get this doom loop of sorts. And councils up and down the country have been feeling this squeeze. There isn't a single area that that we're not having to touch. And we are going to have a list and then we're going to go through that list and we're going to have a look at areas where we can save some more money. We're seeing doubledigit increases in both demand for services and cost of providing those services, adult social care, children's services, temporary accommodation. All of those services are um being used by record numbers of people at record costs. Before people start throwing their uncollected bins at me, this is not a feel sorry for your local council video. I'm not saying that councils are innocent here. Some of them have made absolutely terrible decisions with public money. Cuden is probably the most famous recent example. It's the top of the increase list, not just because of care commitments, but because of a catalog of bad investments that have saddled this council with debt.

[00:13:44]>> One of London's councils has effectively been declared bankrupt.

[00:13:48]>> The infamous brick by brick developer going bust cost the council about £68 million alone and was only one of the issues that led to Cudden submitting multiple section 114 notices. A section 114 notice is basically the local authorities's version of saying we cannot balance the books. So it's not bankruptcy in the normal business sense because a council can't go bankrupt.

[00:14:10]They can't just shut down and vanish, can they? But once the section 114 is issued, all non-essential spending has to stop. Birmingham is another example.

[00:14:18]>> Birmingham is officially broke. The largest local authority in Europe issued a section 114 notice in 2023, partly because of a huge equal pay liability and partly because of an Oracle IT system where the cost went from a projected 19 million to potentially over 200 million. It's outrageous. How does that happen? I could go on. Some councils have made terrible decisions, but bad decisions alone don't really explain a nationwide pattern of increasing funding recently, rising council tax bills, and yet local services still struggling or even declining. The issue is the council tax bill we all pay looks like a property tax and technically it is. But more and more it is morphing into a care tax. And in my opinion, you may disagree, I think that council tax should fund the local services that people use and rely on so communities actually see the benefit of the money that they're paying. I'm a vocal fan of devolution and giving local authorities more power to run their own areas. I think it's crazy that you would run the bus routes of a northern town from London. But care requirements are different, right? Because they're complex, they're expensive, and some areas are inherently just more exposed than others. I think care should be funded more like the NHS, nationally funded, locally managed. We don't tell Heartleyool to fund their own A&E department, do we? So, should we tell them to fund their own care services as well? By making poorer areas fund their own care commitments, you are essentially trapping them in a compounding problem. They have less money to improve the local area. So, the area declines and then the demand for the support services rises and even more of the budget then gets pulled into care. A system where the cost of care falls so heavily on local councils risks increasing inequality over time. I've said it many times before that I think council tax should be reformed. Make council tax fairer. Council tax sticks out to me. If you want a wealth tax, council tax is an obvious place to start. But before we even get to that, it probably should just do at least what people think it does. Because right now council tax is a mess. And not just because it's based on house valuations from decades ago, but because one of the most visible taxes that people pay is increasingly funding something most people don't associate with it. And those costs are escalating fast. That means even a well-run council is buckling under the pressure while the residents look around and think, "Look, I pay my council tax. So why are the roads still broken? Why are the libraries closing? Why is the pier shut?

[00:16:45]Why do the bins still not get collected?" The answer is simple. We're using a 20th century local property tax to fund a 21st century national care crisis.