Council tax bills are expected to climb by £600 per year, delivering a cost-of-living shock to millions of households throughout the UK.
Council Tax Warning: Funding Crisis Looms for Local Governments
The Institute of Fiscal Studies (IFS) is warning households to prepare for major tax increases and cuts to public services, regardless of who wins the next General Election.
According to the largest think tank, the major political parties have failed to disclose how they intend to pay for their social care initiatives.
As a result, the group predicts that local governments will be obliged to significantly increase taxes in the coming years.
Currently, a council can raise taxes by no less than 5% every year without holding a local referendum.
If this were implemented, the average band D property's annual bill would rise by £600 by the end of the next Parliament.
Kate Ogden, a senior research economist at the IFS and author of the think tank's most recent study, stated: "Many councils are under clear financial strain.
"They are struggling to meet the surging demand and cost for services such as children’s and adults’ social care residential placements, special educational needs support and temporary accommodation for the homeless.
"Unless these pressures slow down significantly and quickly, or the next government gives a big injection of funding to local government, councils will likely need to make cutbacks to some areas of provision.
"Given that more discretionary services have often seen cuts of 40 per cent or more since 2010, councils may struggle to do this. More could be pushed to the financial brink, like Birmingham, Thurrock and Woking. It is remarkable that the main parties have been silent on how they would address these challenges."
David Phillips, an associate director at the think tank, said: "With many councils struggling to fund their existing responsibilities, the next Government should be particularly careful in ensuring plans are in place for funding any additional responsibilities they are given.
"This is particularly true for adult social care services, where the Conservative, Labour and Liberal Democrat manifestos made commitments to expand service provision.
"However, none has identified sufficient funding to fully cover the costs of their proposals.
"Without additional funding, these reforms would intensify the pressures on councils’ budgets – potentially seeing some existing social care recipients losing support to help pay for expansions of provision to other, typically wealthier individuals, as financial means-tests are relaxed or abolished."
Taking into consideration household inflation, the real-term increase in council tax bills would be most significant since the 2001-05 parliament.
At the time, local authority tax increases were roughly 6% each year.
Call for Significant Redistribution of Grant Funding in UK's Impoverished Councils
Councils in the most impoverished districts of the United Kingdom are expected to face financial difficulties.
According to the IFS analysis, if all councils' grant funds were reduced by 2.7% per year in real terms and council tax were raised by 5% per year, councils serving the most impoverished tenth of areas would see their overall funding rise by only 1.3% per year in real terms.
This contrasts sharply with the 3% annual real-term increase in council tax costs for the least underprivileged tenth of communities.
To deal with this particular situation, the IFS calls for "significant redistribution" of grant funding from less disadvantaged to more disadvantaged councils.