Many Harrow residents could see their council tax increase by more than £100 if the local authority opts to raise it by the maximum amount allowed.

Harrow Council is to decide whether to implement a newly allowed annual increase of up to five per cent so it can continue to deliver essential services.

The council said it is facing “significant financial challenges” due to rising costs, an increased demand on services, and low funding from central government. Last year’s financial requirements were met by using nearly £15 million from reserves, which the council says is “not sustainable and needs to be put right”.

In November, the Government decided to lift the referendum cap, meaning councils can raise taxes by 4.99 per cent annually without the need for it to be voted in by residents.

Chancellor Jeremy Hunt revealed local authorities would be allowed “additional flexibility” to increase council taxes to help plug an estimated £55 billion hole in the Government’s budget. Increases are made up of three per cent per year just for council taxes and a further two per cent to raise the adult social care requirement.

The move would push the average UK ‘Band D’ bill above the £2,000 threshold for the first time – although homes in Harrow did already pay a little over £2,000 last year – and will cost households up to £4.8 billion a year in five years’ time.

In Harrow, ‘Band D’ households would see an extra £102 put on their annual bill, raising it to around £2,145, and a further £250 by 2027-28. 

Residents have until January 15 to have their say on the council’s draft budget proposals for the 2023/24 financial year, which will include the potential tax increase.

Cabinet member for finance Cllr David Ashton said: “With every budget under pressure, we must be disciplined and make sure we maximise every pound of public money that we spend.”

The draft budget sets out how the council will live within its means, minimise the impact of increased costs on taxpayers, and protect services. Against the backdrop of cost of living increases, the local authority states that the budget will “support and safeguard Harrow’s most vulnerable people”. The final budget will be approved in February’s annual budget meeting. 

It comes after a year where inflation rose to 11.1 per cent, a level not seen for more than 40 years, and with the cost of living crisis continuing to inflict pain across the country – including for councils. Around 95 per cent of councils are expected to hike payments by the full five per cent permitted, according to Treasury analysis. 

Cllr Ashton added: “Our budget for next year focuses on ensuring that the money we have is spent on the things that matter most to Harrow residents – and that it delivers the council’s key priorities.

“Despite the pressures, we will continue to put residents first by focussing on essential services like social care, street cleansing, waste and housing. However, there will be some difficult decisions that need to be considered so we can continue to deliver our services against a backdrop of inflation and continued financial challenge.”