The six areas granted additional flexibility over council tax will be able to raise rates by more than 5% in 2026 and 2027 without the usual legal requirement to have it signed off in a local referendum.
The local government department said the areas had been identified because of their “very low” council tax rates, with households in Band D paying between £450 and £1,280 less than the average in England.
No council has ever won a referendum to raise council tax beyond 5% – although councils in precarious financial positions have been granted special permission to do so by the government, increasingly so in recent years.
Residents in Birmingham have seen tax increases of more than 17% to balance the books over the last two years, after facing effective bankruptcy, while Croydon in south London raised its rates by 15% in 2023.
The Conservatives said the funding review would “punish councils that keep council tax low” whilst “moving funding to badly-run Labour councils that spend irresponsibly”.
“Inevitably, councils that lose out will be forced to cut services or raise tax – and with referendum principles scrapped, those hikes will be big,” added shadow local government secretary Sir James Cleverly.
Reform UK said the settlement would leave rural areas behind, “funnelling money towards Labour-dominated London and city councils”.
It comes as the government confirmed the overall level of council funding will go up by £3.9bn next year, 5.8%, assuming that all councils put up council tax by the maximum 5% across the board.