Folkestone & Hythe Council Tax Rise Explained: Where the Money Goes and What It Means for Local Services

Folkestone & Hythe District Council has begun the annual civic tradition of explaining why everything costs more, while promising not to make it feel like it does. Last year’s actual budget for 2025/26 was signed off by Full Council on 26 February 2025. This year we’re looking at the Budget Strategy for 2026/27  — which is essentially the council saying: “Here are the assumptions, the headaches, and the direction of travel… details to follow.”

So: what’s changed, what hasn’t, and what’s quietly doing cartwheels in the background while everyone stares at the council tax line?

The headline act: Council tax — the “2.99% incantation” lives on

Last year, the council approved an increase that took the Band D figure (including special expense) to £304.81, and it was very clear this was the figure Government watches for “excessive” rises. The district council element excluding special expense was £288.45 (also up 2.99%).

This year’s strategy assumes the same move again: 2.99%, taking Band D (incl. special expense) to £313.92 — a cash increase shown as £9.11  – (about 17p/week on a Band D home).

The strategy also assumes the tax base grows by 1% (about 415 Band D equivalents) — which is the polite way of saying: “More homes should mean more council tax, even if some of the costs arrive later in sudden ‘step changes’ like refuse collection.”

If this all feels familiar, that’s because it is. In the spirit of Yes Minister:

Cllr Jim Martin: “Can we keep council tax down?”
Alan Mitchell s151 Officer: “Of course, Jim.”
CEO Dr Susan Priest “How?”
Alan Mitchell s151 Officer: “By calling the increase ‘modest’, and ensuring it is 0.01% below the point at which the public is formally allowed to object.”

The underlying story: a budget that balances… by using “one-off” money

The 2026/27 strategy says, bluntly, that a balanced budget (including use of earmarked reserves) was set for 2025/26 — i.e., the council balanced last year partly by dipping into pots that don’t automatically refill.

That matters because the strategy also repeats the core truth about reserves: they can plug a hole once, but they don’t fix the pipe. The document stresses that permanent fixes require reducing baseline spending or adding recurring income.

And the pipe problem is not tiny. The strategy points to the then-current MTFS (Feb 2025) forecasting a cumulative funding gap of £5.523m by 2028/29, with £723k originally forecast just for 2026/27.

Reserves: last year’s “forecast cushion” vs this year’s “starting piggy bank”

Here’s one of the starkest contrasts.

In last year’s 2025/26 budget report, the council forecast that by 31 March 2026:

• the General Fund Reserve would be £4.596m, and

• total General Fund reserves (general + earmarked/ringfenced) would be £12.345m.

But the 2026/27 Budget Strategy states that at the start of 2025/26 (1 April 2025) total General Fund reserves were £21.55m, with £5.89m in the General Reserve.

That gap between “start” and “forecast end” tells you what balancing with reserves can look like in practice: the council can get through a year, but it may be spending down its resilience to do it. (And once the easy one-offs are gone, you’re left with the harder choices.)

Pay, inflation and the bill for simply running a council

Last year’s 2025/26 budget papers show a £1.0m provision for the pay award (at 4% plus increments, subject to approval), plus a £425k pressure from employer National Insurance changes (partly offset by a £216k NI rebate grant).

This year’s 2026/27 strategy identifies salary costs of £21.6m and notes the second year of a two-year pay settlement: £1,500 added to every spinal point or 3.5% (whichever is greater), estimated at ~£850k.

The inflation backdrop is also less friendly. The 2025/26 strategy talked about CPI projected around 2.6% and borrowing staying higher for longer (around 5%).
The 2026/27 strategy cites CPI at 3.6% (June 2025) and borrowing rates under 6% on 30-year loans. 

In other words: last year’s budget was built on “elevated”; this year’s is built on “still elevated, plus stickier prices.”

Government grants: last year’s “one-year bonus” becomes this year’s “assume it’s gone”

In the 2025/26 settlement, the council was still receiving New Homes Bonus — and the council’s own papers describe it as a one-year payment with no future legacy.

The 2026/27 strategy now assumes NHB has ended and no further payments will be received, referencing the Fair Funding Review consultation’s view of the scheme.

The strategy also notes that “RSG” reappeared in 2025/26 partly because other grants were rolled into it, while other funding was removed — and it assumes the next settlement will again be “cash flat” for districts.

Translation for normal people: central funding is unreliable, sometimes re-labelled, and rarely grows in a way that matches costs.

Business rates: £45m collected… and the fear of keeping none of it

The 2026/27 strategy notes the council is due to collect over £45m of gross business rates in 2025/26, but under the current system billing authorities “initially” keep 40% before tariffs/top-ups.

It also flags something more existential: a reset could mean the council may no longer retain any business rates in future, with only transitional damping hoped for. 

If you want a single sentence that sums up district-council finance in 2026: it’s this — you can be responsible for collecting a mountain of money, without being allowed to rely on keeping it.

Fees and charges: the quiet pressure cooker

Last year’s approach was already “full cost recovery where discretionary.” This year’s strategy doubles down: it assumes a minimum 3.6% increase (June CPI) for discretionary charges, or full cost recovery, and openly admits fees and charges “will need to play a major part” in closing the gap. 

That is likely to land (again) on the public-facing services people actually notice: parking-related items, venues, regulatory services, and anything discretionary where the council is allowed to charge.

The new(ish) character entering stage left: Local Government Reorganisation

The 2026/27 strategy explicitly adds Local Government Reorganisation (LGR) and “transitional costs” to the list of pressures, and notes an LGR reserve was set up in 2025/26 to mitigate associated costs.

That’s a material difference in tone from last year’s strategy, which discussed reform in general terms; this year reads like: “this might actually happen, and it might cost money before it saves any.”

Capital and borrowing: the numbers creep upwards

Last year’s 2025/26 Budget Strategy said the approved MTCP required about £84m of prudential borrowing.

This year’s 2026/27 strategy puts that at about £90m.

The strategy again frames prudential borrowing as best suited to “invest to save” projects (and namechecks Otterpool Park, Oportunitas Ltd and Coast Drive Seafront Development), because borrowing only makes sense if the returns cover the ongoing revenue costs (interest + MRP).

What it means for residents (and what to watch as the detail arrives)

The 2026/27 Budget Strategy is not yet the full budget — it is the scaffolding. But compared with last year’s signed-off 2025/26 figures, the direction is clear:

• Council tax: same percentage logic, higher cash total. 

• Reserves: acknowledged as a one-off tool; the scale of reserves movement is the real sub-plot.

• Funding gap: still there, quantified, and sensitive to inflation, interest rates and settlement outcomes.

• Grant roulette: NHB fades out, “cash flat” expectations remain.

• Pressure points: pay, temporary accommodation, and the possibility that business rates retention changes in ways that hurt.

And somewhere in the middle of all that will be the human question: what does the council stop doing, start charging for, or try to automate — and who feels it first?

The Shepway Vox Team

Discernibly Different Dissent