Who will cover the local authority budget shortfalls?
While the subject of savers has been very much placed on the backburner by the UK government, it may well be about to make a reappearance in dramatic fashion. The Local Government Association (LGA) has stepped into the breach to comment upon the Bank of England's decision to reduce UK base rates to 1% and the impact this will have on council taxes. The news, while not totally unexpected, will shock many of the UK population and could have serious consequences.
The LGA has confirmed that the reduction in UK base rates over recent times will cost local authorities more than £600 million a year. This is the amount of money lost in interest, due to the substantial reduction in UK base rates over the last two years. This interest plays a major role in calculating local authority budgets and the black hole will need to be filled at some point. But who would be forced to step into the breach?
It would appear more likely than ever that UK taxpayers will be forced to make up the £600 million a year deficit with higher local taxes in due course. This situation is sure to put the future of the current Labour government at risk with many suggesting a return to the old days of uncontrollable spending and ever increasing government debt.
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