- Insights
Council Tax Increase to Provide £330 Million for Police Departments
Council Tax Increase to Provide £330 Million for Police Departments
The UK government has announced a rise in council tax bills for 2025 to cover a 3.5% increase in police department funding costs. The total police budget for 2025-26 will reach £17.4 billion, an increase of £986.9 million compared to this year.
In a written statement, Policing Minister Dame Diana Johnson informed MPs that council taxpayers in England and Wales would need to contribute an additional £329.8 million to help fund the increased costs.
This council tax hike is expected to generate an additional £330 million in revenue for England and Wales in 2025.
According to Labour’s earlier confirmation, the council tax increase will be capped at 5%, potentially raising household bills by £100. For a Band D property, the average council tax for 2024-25 is set at £2,171. Under the new policy, the average annual bill will increase by £14.
The Policing Department also confirmed that the additional funds from the tax hike will be used to cover higher police wages, increased employer National Insurance contributions, and additional recruitment costs. This includes a £339 million boost to core grants to support community police recruitment and deployment.
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Five Rising Household Costs in the UK for 2025
With the confirmation of council tax increases, UK households will face significant rises in everyday expenses in 2025—from water and energy bills to council tax and TV licence fees. Here’s what to expect:
Energy Bills
Analysts predict energy costs may rise again starting in April 2025 due to market instability and the price cap adjustment. The energy price cap, which was increased to £1,738 on January 1, 2025, could rise again to £1,762 annually—a 1% increase for a typical dual-fuel household, according to Cornwall Insight.
Water Bills
Regulator Ofwat has allowed water companies to raise average bills by £31 annually over the next five years, totaling a £157 increase by 2030. This means the average water bill will reach £597. Starting in April 2025, households in England and Wales will pay an additional £86 on average in the first year alone, with smaller percentage increases in subsequent years.
Council Tax
Council tax will increase in 2025. Labour has stated that local councils in England can raise rates by up to 3%. However, any rise beyond 5% would require government approval or a public referendum. For Band D properties, households can expect an increase of over £100 above inflation in 2025.
Mortgages
The outlook for mortgage repayments in 2025 remains uncertain, but floating mortgage rates are likely to rise, as repayments depend on inflation and interest rates. Earlier this month, the average two-year fixed mortgage rate rose to 5.49% from 5.42%. The Bank of England estimates that nearly half of mortgage holders will face higher payments in the next three years. By 2027, approximately 4.4 million mortgages could see increased repayments, with 420,000 households experiencing monthly increases of £500.
TV Licence
The government has announced that TV licence fees will rise annually in line with inflation until 2027. From April 2025, the fee will increase to £174.50, adding an extra 42 pence per month.
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Bank of England Warns of Economic Stagnation
The UK’s inflation rate has risen for the second consecutive month to 2.6%, marking the highest price increase since March.
At its final meeting of the year, the Bank of England’s Monetary Policy Committee (MPC) voted 6-3 to keep interest rates at 4.75%, prolonging the financial strain on households and businesses caused by higher borrowing costs.
The Bank of England also warned of potential economic stagnation due to the impact of Chancellor Reeves’ budget and concerns over a renewed global trade war under Trump’s potential return to power. Threadneedle Street has significantly downgraded its forecast for the UK economy, predicting zero growth in the fourth quarter of 2024.
Economic activity in the UK has slowed in recent months, with October’s output unexpectedly shrinking by 0.1%. Employment levels are also falling at the fastest rate in four years.
Additionally, the US Federal Reserve lowered its interest rates by a quarter percentage point to 4.25-4.5% last week but hinted at fewer rate cuts in 2025 than expected, triggering financial market sell-offs.
