Local authorities will be able to to raise council tax by 5 per cent without holding a referendum – but London Councils says even this would not fill the funding shortfall.

The change was announced in Chancellor Jeremy Hunt’s Autumn Statement on Thursday (November 17).

Currently, councils can raise council tax by 1.99pc, along with 1pc for adult social care, without going to the people for a vote.

From April 2023, and for the next five years, these limits rise to 3pc in general council tax and 2pc for the adult social care precept.

The Treasury expects 95pc of local authorities to charge their constituents the full amount.

Mr Hunt said councils are “welcoming today’s announcement”, but local authorities say even such a tax hike would not be enough.

London Councils’ analysis before the budget showed boroughs face a funding gap of £400m this year (2022-23) and £700m next year (2023-24).

The cross-party group estimates that the government permitting council tax increases of 5pc could still only close the gap by £80m.

If boroughs were to try generating the £700m from London’s council taxpayers, council tax bills would need to rise by around 18pc.

Chair of London Councils, and Camden leader, Cllr Georgia Gould said borough finances “remain in a critical condition”.

“Before today’s statement from the chancellor we estimated a £700 million shortfall next year for councils in the capital, which means a bleak future for many of the local services our communities rely on,” she said.

“Council tax is not the answer to the inadequate funding we’re grappling with. Council tax rises during a cost-of-living crisis are extremely difficult for the struggling households we’re determined to support.

“But even if council tax goes up, it could never plug that £700m funding gap.”

She said boroughs need proper investment from the government, similar to what was provided during the Covid-19 pandemic, to deal with the economic emergency.

She said: “We stand ready to work together in finding a sustainable solution that protects local services, helps Londoners through cost-of-living pressures, and secures the economic growth we all want to see.”

Mr Hunt said in the Commons: “I think local councils are welcoming today’s announcement because the biggest item of expenditure, that worries them the most, is their social care budgets.

“And this is the biggest ever increase in the social care budget.”