An east London borough is seeking special government permission to increase council tax by a massive 10% in a bid to avoid going bust.
Newham has applied for “exceptional financial support”, which will allow it to hike council tax by twice the maximum amount allowed elsewhere in the country as well as permission to sell off assets for day-to-day spending.
The town hall is blaming a £157million budget gap caused by the spiralling cost of providing temporary accommodation for homeless residents.
Local authorities can usually only raise council tax every year by up to 5% without triggering a referendum. But in exceptional circumstances they can apply to central government for permission to raise the extra cash.
For example bankrupt Woking signed off a 10% rise last year, while Croydon hiked bills by 15% in 2023.
Birmingham City Council approved an increase of 21% over two years, Thurrock put bills up by 8%, while Sough approved an 8.5% rise. All of these local authorities had effectively declared themselves bankrupt.
Newham said if the 10% increase is approved, it will still have the seventh lowest bill in London. The average Band D home in the borough currently pays £1,724 per year, including the Greater London Authority precept set by the Mayor of London.
Sadiq Khan is set to confirm how much his share of the tax will go up on Wednesday.
Zulfiqar Ali, Newham’s cabinet member for finance, said: “Nearly 70% of our budget, like most councils, is already spent on services for vulnerable children and adults, leaving just the remaining 30% for every other service we provide.
“That’s why we are needing to apply for Exceptional Financial Support…This obviously isn’t sustainable and the whole local government sector needs multi-year fairer funding settlements based on local need.
“The proposed council tax rise is the amount the government expects us to consider, and is entirely down to the growing costs to stop people being on the streets because of the housing crisis in London; and we remain committed to supporting those most in need through a proposed 80% Council Tax Relief Scheme.”
Later this month Havering will discuss its council tax plans as it also tries to avoid going bust over a predicted £74million budget gap.
In a consultation launched last year the borough’s leader Ray Morgon said the options open to the town hall were “significantly increasing council tax” beyond 5%, another government loan or effectively declaring bankruptcy.
Lambeth, which has issued a stark warning to Chancellor Rachel Reeves about its £70million deficit over the next four years, is preparing to remove protections that see some of the poorest residents pay no council tax at all.
The town hall will instead offer an up to 80% reduction in bills for the most vulnerable.
David Amos, Lambeth’s cabinet member for finance, said: “We need to make significant savings due to reductions in the amount of money we have to spend and rising need for our services.
“Local government services are at breaking point following fourteen years of central government austerity, rising inflation and demand for public services – meaning Lambeth must do more each year with less money, leaving us with a significant funding gap in the years ahead.”
