Government denies Birmingham City Council request for 9.99% tax hike

Birmingham City Council has been denied permission to increase its council tax by 9.99% next year, as it battles to lawfully balance its 2025/26 budget.

The request to the government was rejected, but Deputy Prime Minister Angela Rayner has allowed the authority to raise it by 7.5%. 

The council previously said it would be unable to set a lawfully balanced budget without the rise, however, council leader John Cotton has now said the government believes Birmingham has made enough progress to cut the proposed tax hike. 

It comes as the government has agreed to a £69bn funding settlement for councils across England, representing a 6.8% increase. 

Birmingham City Council has secured an 8.9% boost, meaning its core spending power will rise by £120m. It is however, still planning to make £153m in cuts for the 2025/26 budget.

Savings of £43m are expected to come from cuts to adult social care, £41m from children and families services, £23m in city operations and £18m from city housing. 

The budget gap, initially forecast at £67m, widened by another £67m due to rising employer’s national insurance costs and higher-than-anticipated social care expenses driven by the national living wage increase.

The effectively bankrupt council had received £1.255bn in Exceptional Financial Support (EFS) from the Government, which must be paid back through £750m of asset sales.

Cotton said: “Michael Gove and the previous Tory government were adamant that council tax would have to go up to 9.9% for a second successive year, regardless of any progress made over the last 12 months.

“The Labour Government is working far more constructively with us, and following extensive talks, we’ve agreed that Birmingham has made sufficient progress over the last 12 months to reduce the planned council tax increase.”

In a written statement, Angela Rayner said: “These are difficult decisions that Government has not taken lightly. We recognise the importance of limited increases in helping to prevent these councils falling further into financial distress – but we have been clear this must be balanced with the interests of taxpayers.

“We have agreed to a limited number of requests and in all cases have not agreed to the full amount requested.

“Where we have agreed, it is only for councils with amongst the lowest levels of council tax, and where we expect, even after these increases, residents will still be paying less than the average compared with similar councils.”

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