Explained: How Local Councils Raise Council Tax Without a Referendum

What happened to residents’ right to vote on ‘excessive’ council tax increases? And what does that have to do with the growing number of councils in financial crisis? This article explores the slow erosion of a democratic mechanism that was once promised to every taxpayer.

Across the country, local councils are in distress. The headlines follow a familiar pattern: a council warns it is ‘on the verge of bankruptcy,’ citing unsustainable costs in Special Educational Needs provision, adult social care, ballooning interest repayments on debt, and unexpected losses on major regeneration schemes. The proposed solution? A council tax rise—almost always set at exactly 4.99%.

Why 4.99%? Because 5% is the legal threshold. Go above it, and councils must ask residents for permission through a local referendum.

The referendum safeguard was introduced under the Localism Act 2011. Then-Conservative Minister Eric Pickles hailed it as a way for residents to block “excessive” tax increases, declaring that councils should defend their budget decisions and bill increases to the local electorate instead of Whitehall.

The right hinges on one word: excessive. Under Sections 52ZB and 52ZC of  the Local Government Finance Act 1992, the Secretary of State publishes the annual Referendum Principles, which define what counts as an excessive rise for each class of authority—unitary, county, fire, police, and so on. If a council’s proposed increase breaches the threshold, a local referendum must be held.

Historically, this was clear-cut. A uniform threshold applied to each category. If a unitary council’s cap was set at 2%, then a 2.5% rise would legally trigger a referendum.

In practice, though, the system has barely been used. Only one referendum has taken place—Bedfordshire Police, in 2015, proposed a 15.8% rise. Voters rejected it, with 69.5% voting no. Other councils have quietly shelved similar plans before ballots were cast.

After 2015, things began to shift. The law didn’t change—but its application did. As councils faced mounting deficits, ministers began redefining what counts as excessive.

The workaround? Create bespoke categories within the annual Referendum Principles. There’s no legal limit on the number of categories, or how many councils each one must include. Some categories were created for just a single authority. A rise of 15% might be considered excessive in one council—but routine in another.

The referendum mechanism was not repealed. It was hollowed out.

Knowing a public vote would likely reject a large tax increase, councils opted instead to approach ministers directly. And ministers, eager to avoid the disruption and embarrassment of a Section 114 notice—formal bankruptcy—granted permission.

This isn’t a loophole. It’s a backdoor mechanism. A perfectly legal, repeatable escape route from local democratic accountability.

Each year, the Secretary of State reissues the Referendum Principles. But the definition of “excessive” is now fluid—varying from place to place, shaped by political expedience more than principle.

What was once a national safeguard has become a postcode lottery. In one council, a 5% increase is outrageous. In another, 10% goes through without a murmur. Public consent—once integral to the process—is now the exception.

The system that was supposed to empower local voters has, in practice, excluded them at the most critical moments.

The broader issue is legitimacy. Residents expect to have a say over sharp tax rises. But they rarely do. The Local Government Association has warned that one in four councils may require Exceptional Financial Support in the next two years.

As the number of “exceptions” grows, the principle of a referendum risks disappearing entirely.

In one widely publicised case, campaigners launched petitions opposing a dramatic council tax increase. The increase was implemented anyway. There was no poll-tax-style revolt, and perhaps the government was relieved.

In a system where rights vanish when they become inconvenient, what trust can remain?

One council that has not yet taken this route—but came close—is Kent. In November 2022, Kent County Council publicly warned the Prime Minister – Rishi Sunak – that it was at risk of issuing a Section 114 notice. Although it did not ultimately declare bankruptcy, nor request a referendum or seek a bespoke “excessive” category, the financial pressure remains intense.

Now, with a Reform UK administration in charge and facing a de minimus £75 million budget shortfall, this path may be under active consideration in 2026/27.

The precedent is already set. If other councils have secured vote-free, rises beyond 4.99%, by being reclassified, Kent could do the same. Residents may face steep hikes without ever being consulted.

This is why vigilance matters. The right to a referendum may still exist on paper—but that doesn’t mean it will be honoured in practice. Kent residents, and the wider public, should pay close attention.

What was once a clear and principled safeguard is now a system riddled with exceptions and redefinitions. As more councils struggle, and more thresholds are adjusted, the promise of a say over tax becomes increasingly hollow.

People read the headlines. They see the tax bills. But the promised referendum never arrives.

Yes, the Secretary of State still holds the power to trigger one. But that power is increasingly used to avoid them. The law remains intact, yet its spirit is routinely circumvented.

If a democratic right can be withdrawn whenever it’s politically inconvenient, was it ever really a right at all?

A legal challenge to this trend would likely be difficult. But morally, the case is clear. If the public is promised a say, then ministers should not be able to redefine the rules until that promise becomes meaningless.

It may be time for Parliament to step in and strengthen the system—to make the referendum threshold more consistent, and its enforcement more transparent.

Was the previous government wrong to offer a veto over excessive tax hikes? Perhaps not. But by giving ministers the power to define the word “excessive” out of existence, they rendered that promise largely symbolic.

And some might say—that’s excessive.

The Shepway Vox Team

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