Middle-class households in rural areas could see their council tax bills increase by up to £376 annually as part of Deputy Prime Minister Angela Rayner’s proposed overhaul of local government funding.
The County Councils Network (CCN), which represents rural local authorities outside major cities, has warned that wealthier towns and villages such as those in Surrey and other Home Counties will bear the financial burden of redistributing funds to poorer areas.
According to the CCN, a typical family living in a Band D property in the countryside could face council tax rising from £2,380 today to around £2,756 by 2029 under the new system.
The reforms aim to generate more revenue from middle-class areas to help boost funding for deprived urban neighbourhoods. However, the CCN claims this will force rural councils to increase council tax at the maximum permitted rate of 5% annually for the next three years just to maintain services.
While this approach is intended to strengthen city council budgets, the CCN cautions it may result in less funding for rural authorities despite higher tax bills for their residents.
The warning follows the closure of a government consultation on the new funding formula last Friday, with changes expected to take effect next year.
Nearly half of England’s population lives in the mainly rural towns and districts represented by the CCN. Their research found that £1.6 billion of council tax income from these rural authorities would be redistributed to larger towns and cities, particularly in the North of England.
Residents faced with highest council tax
Surrey County Council is projected to be the largest loser from the reforms. Tim Oliver, leader of Surrey County Council and chair of the CCN, said the county could lose approximately £160 million over three years.
“Our residents will face the highest council tax increases, but funding won’t rise accordingly, putting serious pressure on local services,” Oliver said. “Meanwhile, significant sums will flow out of Surrey to other parts of the country.”
He added that many councils are already cutting costs and have limited options left, raising concerns that some may have to reduce frontline services or face financial insolvency.
Oliver also highlighted that the reforms unfairly penalise rural councils, where larger homes mean more council tax revenue but where services are costly to deliver.
Although the funding formula takes into account the higher costs of providing services in rural areas, the CCN warned that the burden on rural taxpayers would remain disproportionately high.
Conservative Party leader Kemi Badenoch criticised the plans, accusing the Labour government of showing “utter contempt” for rural Britain by diverting funds from county councils to Labour-run urban areas.
Reform UK deputy leader Richard Tice also condemned the move, arguing that councils should focus on improving spending efficiency rather than seeking more money from taxpayers.
This debate comes as Labour’s Rachel Reeves reportedly considers a new property tax targeting wealthy households in the South to address a £50 billion funding gap ahead of the autumn budget.
A spokesperson for Deputy Prime Minister Rayner’s office rejected the CCN’s analysis, stating: “The current outdated funding system has left many communities behind and harmed local services. This must change. Our Plan for Change will reform local government funding to improve public services while maintaining protections for taxpayers, including the previous government’s referendum threshold on council tax increases.”
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