Link between paying taxes and quality of council services in England ‘broken’, say MPs

Councils in England are being asked to deliver more than ever before, without adequate funding to allow them to do so effectively, says the cross-party Housing, Communities and Local Government (HCLG) Committee in a report published today (Wednesday).

The cross-party Committee report finds that the broken link between tax and service quality is leading to a growing dissatisfaction among residents and, as the Government Minister notes, risks undermining trust in local democracy in England. The report also points to widespread cuts to preventative services over many years having exacerbated the financial crisis in local government.

The report recommends the Government overhaul council tax, “the most unfair and regressive tax in use in England today”, and look at greater fiscal devolution, allowing councils to set their own forms of local taxes, such as tourist levies, to help make the local government system fair and effective.

Florence Eshalomi, Chair of the Housing, Communities and Local Government (HCLG) Committee said: “When residents are paying more and more in taxes but seeing less and less in regular, everyday services, such as libraries and fixing potholes, then trust in local democracy is at risk of being undermined.

“Government in England is overcentralised. The current financial pressures on local government are also driven largely by mandatory, high-cost, demand-led services, such as social care and SEND, where councils have little control over these needs. Councils are trapped in a straitjacket by central government, with local authorities lacking the flexibility or control to devise creative, long-term, preventative solutions which could offer better value-for-money.

“Reform of council tax should be a greater priority for the Government. In the long-term, HM Treasury should devolve tax-setting powers to local authorities, allowing them to set their own local taxes, such as tourist levies. If, as a country, we are going to deliver growth and improve local services, Westminster needs to ease its grip and let councils have more power to control their own affairs and be accountable to their own electorates.”

As an interim step to reforming council tax, the report calls on the Government to give local authorities more control over the council tax in their areas, including the power for individual councils to revalue properties in their area, define property bands, set the rates for those bands, and apply discounts.

The report says that devolving fiscal powers and responsibility to local authorities, must be part of any fix to the local government finance system.  The report recommends the central government ringfencing of funding is replaced with a rigorous outcomes-based system of accountability, so that local authorities are held accountable for achieving against a set of agreed outcomes within their overall budgets, not for meeting spending targets.

The Committee's The Funding and Sustainability of Local Government Finance report covers a range of topics, examining council services under strain and the big pressures on local finances, including adult social care, special educational needs and disabilities (SEND), and homelessness and temporary accommodation.

The report reiterates the recommendations of its previous report on children in temporary accommodation, England's Homeless Children, and calls for the Government to reconsider its decision to freeze Local Housing Allowance rates and extend its support for local authorities to acquire new housing stock through the Local Authority Housing Fund.

ENDS

Further information

1. Report summary on p. 1 and list of report conclusions and recommendations on p. 73.
2. During this inquiry, the cross-party group of MPs heard from witnesses including academics think tanks, the Comptroller & Auditor General and the National Audit Office, the Chartered Institute of Public Finance and Accountancy (CIPFA), local government finance specialist Dan Bates, and representatives from English local government, including councillors and finance directors. At the ministerial session, the Committee questioned Jim McMahon OBE MP, the Minister for Local Government and English Devolution, and Nico Heslop, Director for Local Government Finance at the Ministry of Housing, Communities and Local Government.
3. Local authorities in England provide more than 800 services for the benefit of local taxpayers, most of which authorities are required to deliver by law (source: Local Government Association, An introduction to local government).  The net cost of these services is approximately £139 billion in 2025/26, compared with £130 billion in 2023/24 (Ministry of Housing, Communities and Local Government, Local authority revenue expenditure and financing: 2025-26 budget, England, gov.uk, 19 June 2025).