Who will benefit from planned council tax reforms?

The government is planning to overhaul the council tax system, so areas with higher needs get more money.

At the moment, around half of all local council funding comes from central government - and the rest is made up largely of council tax. 

But the way that central funding is distributed hasn’t always felt fair, especially for areas facing high demand for services like adult social care, housing support and children’s services. 

Under the new plan, areas with the greatest need would receive more support from the government, so they wouldn’t have to lean so heavily on residents through big council tax hikes.

But the proposals, perhaps inevitably, will mean some places will benefit more than others.

Where the gains are likely to be

The IFS has crunched the numbers and said there will be winners and losers from these reforms.

Outer London could be the biggest winner, as boroughs such as Enfield, Havering and Hillingdon could see overall funding rise by around 20% in real terms over the next three years, if they raise council tax by the maximum 5% a year.

Meanwhile, councils in the East Midlands are set for an average 15% funding increase, followed by Yorkshire and the Humber at 12%.

In addition, rural areas, which had feared losing out, may actually see funding changes in line with the national average.

Who could miss out?

Inner London - especially the west - could lose most, the IFS believes.

Even with protections in place, Camden, Kensington & Chelsea, Westminster, Wandsworth and Hammersmith & Fulham are on course to see funding fall by 11-12% in real terms by 2028–29, even if they raise council tax each year by the maximum allowed.

The IFS also believes that deprived areas won’t see the boost that many predicted.

Average funding increases for councils covering the most deprived 30% of arrears are set to be similar to those in the middle 40% over the next three years.

Kate Ogden, one of the authors of the IFS report, said it is “welcome that the nettle of funding reform is being grasped”

“England has lacked a rational system of local government funding for at least 12 years - and arguably more like 20,” she commented.

“Some councils will benefit substantially under the new system.”

However, Ms Ogden added that the changes will “sting” for councils that are “assessed to currently receive too high a share of the overall funding pot”.

What could it mean for your council tax bill? 

If your council is in a high-need area, the changes might mean smaller increases to your bill.  

But if you live in an area that hasn’t seen big hikes in recent years, that could change. 

Some councils may need to raise more money locally to make up for reduced central funding. 

So while the aim is to make the system fairer overall, the impact will vary depending on where you live.