Council tax is expected to rise by 5% a year to pay for local services, documents in the Spending Review suggest.

Bills are also expected to rise further to pay for an increase in police funding.

Local authorities have the power to raise the tax by up to 5% every year, although some choose lower increases.

However, Wednesday's Spending Review assumes councils will raise it to the maximum level.

The review allocated a 1.1% increase in grant funding to local government, but said total spending power for councils would rise by 2.6%. That includes funds councils can raise from council tax, as well as things like business rates.

Councils can raise council tax by more than 5% if they hold a local referendum or get approval from central government.

Council tax has generally increased by the maximum of 5% a year recently amid strained town hall budgets. Some councils in particular financial difficulty have increased bills by significantly more.

• Read more about how the Spending Review could impact council tax

The Department for Health and Social Care will for more than 40% of total day-to-day government spending by the end of the decade, according to the IFS's Paul Johnson.

That compares to just 26% in 2000-01.

The IFS has been examining the details of the Spending Review, and Johnson says the share of spending handed to health compared to 25 years ago is "quite remarkable".

But he adds: "One has to question for how much longer this relentless increase can continue."

The Institute for Fiscal Studies (IFS) think tank has warned that the government is just one move away from having to raise taxes in the Budget later this year.

IFS director Paul Johnson says: "Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the Autumn."

The OBR is predicting that based on its forecasts and Reeves's fiscal rules, the government will have a surplus of £9.9bn by the end of the decade.

That's not much of a buffer if, for instance, the UK economy slows and debt interest costs grow even further.

"With spending plans set, and "ironclad" fiscal rules being met by gnat’s whisker, any move in the wrong direction will almost certainly spark more tax rises," says Johnson.

Nick Triggle
Health correspondent

We now have the latest waiting time figures for the NHS in England.

It comes the day after the government set out an above-inflation boost to the health budget in the coming years.

Ministers have made hitting the waiting time target for hospital treatment, for things like knee and hip operations, one of its key missions this parliament.

These figures show just how far the NHS remains behind the 18-week target, which requires 92% to be seen within 18 weeks.

April performance was just below 60%. However, the overall numbers on the waiting list dropped to 7.39 million, down from 7.42 million in March.

That provides some good news for the government – the March figure was a rise on the month before, the first time the waiting list had gone up in six months.

Waiting times can jump around a bit over the course of the year so we should not read too much into one set of figures. But with this target having not been hit since 2016 achieving its NHS mission, even with the extra money, remains a major challenge.

Image source, Getty Images

Chancellor Rachel Reeves and Conservative leader Kemi Badenoch both spoke to the BBC this morning following yesterday's Spending Review.

Here's a recap of what they said:

• Reeves said everything in the Spending Review was paid for by "difficult decisions" she has made as chancellor
• Badenoch accused Labour of spending future generations' money, saying "this is a spend now, tax tomorrow government"

• Reeves rejected claims from the National Police Chiefs' Council that the police head count would be cut following the Spending Review, arguing that police spending power is going up significantly
• The chancellor also described the latest UK growth figures as "disappointing", adding that April was a "challenging month" with uncertainty
• Badenoch said a shrinking economy was "causing a problem that needs to be fixed", adding that Labour "went after businesses" when it hiked employers' National Insurance
• She added that the UK "cannot afford" a lot of the spending plans Reeves set out in her review and the UK will have to borrow more to finance them

Growth still in positive territory over longer termpublished at 09:53 British Summer Time 12 June

09:53 BST 12 June

Michael Race
Business reporter

While April's figure showing the economy contracted is the headline figure today, it's important to put this into context – it is just one month.

Monthly figures can be volatile and be revised up and down, so there should be a degree of caution when coming to conclusions.

The more stable three-month figure to April actually shows the economy overall grew by 0.7%.

So while the bigger-than-expected contraction for April’s figure alone might be deemed as a blow to the government after the Spending Review yesterday, growth is still in positive territory over the longer term.

Earlier this morning, Rachel Reeves was asked about comments from independent think tank the Institute for Fiscal Studies (IFS) about potential council tax increases.

IFS Deputy Director Carl Emmerson told BBC Breakfast that a "big chunk" of funding for local authorities in the Spending Review is coming from an assumption that council tax in England will rise by the maximum amount of just under 5% each year.

While this would help fund adult social care and local police, it would also be the "biggest rise in council tax since the early 2000s", he said.

• For context: Local authorities in England can raise council tax by a maximum of 4.99% per year without a referendum or special permission, and most of them already do.

Emmerson also said the NHS and defence departments were the "two clear winners" from the review, but they might need funding "top ups" to meet the government's "ambitious" targets.

UK economy is resilient but lacklustrepublished at 09:19 British Summer Time 12 June

09:19 BST 12 June

Dharshini David
Deputy economics editor

Evidence that the economy went into reverse in April is not the kind of news the chancellor needs the day after an announcement that already has economists predicting more tax rises will be needed in the Autumn Budget to fund them.

There were several distortions that affected April's figures. There was an inevitable drop in housing transactions after buyers rushed to beat a change in Stamp Duty. Exports to the US also fell following a stampede earlier in the year to pre-empt President Trump's tariffs.

Strip these out and the trend is one of an economy that's resilient – but lacklustre.

There is growing evidence of domestic policy changes, such as the rise in employers' National Insurance Contributions hitting activity.

Analysts predict that annual growth will remain between 1% to 1.5% for the next year or two – hardly spectacular and not the pace of renewal the chancellor would hope for.

Let's take a closer look at the economic figures that came out this morning.

Aside from a poor showing for the services sector in April, UK businesses really began to feel the effect US tariffs.

The ONS says that after months of rises: "April saw the largest monthly fall on record in goods exports to the United States with decreases seen across most types of goods, following the recent introduction of tariffs."

Before we heard from Chancellor Rachel Reeves and Conservative party leader Kemi Badenoch, the GDP figures for April were released, which showed the UK economy had shrunk by 0.3% during that month.

Conservative shadow chancellor Mel Stride has called the-worse than-expected figures a result of “economic vandalism”.

"Before the election Labour promised 'growth, growth, growth' but today's fall in GDP lays bare the disappointing consequences of Rachel Reeves' economic vandalism," he says.

He then goes on to add that “under Labour, we have seen taxes hiked, inflation almost double, unemployment rise, and growth fall."

More now from the chancellor on Radio 4’s Today programme.

Presenter Nick Robinson returns to day-to-day spending. “The 3% increase on NHS spending sounds high”, he says, adding that it’s gone up by more than under previous governments. He asks if will be enough to deliver on the promises on health?

Reeves says she visited hospitals today and yesterday - this morning’s interviews were done from a hospital in Derby – and says NHS workers have welcomed the settlement, adding that she is "confident" it will deliver.

Robinson fires back: "You're confident, but the experts aren't." He quotes the Nuffield Trust think tank, saying the settlement will "melt away" due to planned pay rises. Productivity in the NHS has also gone down, Robinson says.

That's why NHS reform is also important, Reeves says. "It can't just be about more money."

The government has invested in more scanners, ambulance fleets, the NHS app and hospital buildings, she says.

We've heard from both Labour and the Conservatives this morning about the Spending Review.

We can bring you a few more lines now from Tory leader Kemi Badenoch's earlier comments on the Today programme, where she was speaking to the BBC's Emma Barnett.

Labour is spending future generations' money, Badenoch says.

She tells the BBC that the country "cannot afford" a lot of the spending plans Reeves set out in her review and the UK will have to borrow more to finance them.

"That's our children's money she's spending," she says.

Badenoch says a conversation is needed about "how we make the state better", adding that "this is a spend now, tax tomorrow government".

Today programme presenter Nick Robinson has been quizzing Rachel Reeves on her Spending Review.

Reeves has said she has no plans to increase taxes, but Robinson says this doesn't rule out a big tax rise in the autumn.

After all, Robinson adds, the government said it did not plan to increase taxes at the general election, but did raise them after entering office.

Reeves says everything in the Spending Review was paid for by "difficult decisions" she has made as chancellor.

Due to economic uncertainty, no chancellor could write four years of Budgets within her first year in office, she adds.

We're about to hear from the chancellor again - this time on BBC Radio 4's Today programme.

You can listen to what she has to say by clicking watch live at the top of the page - and we'll be bringing you key lines from her comments right here.

At the same time that we were hearing from Reeves, Tory leader Kemi Badenoch was speaking with the BBC's Emma Barnett over on the Today programme.

We can bring you some of her comments now.

Barnett begins by reading a section of Badenoch's op-ed in the Times this morning, where she wrote "the government cannot do everything, the state cannot fix every problem". What does Badenoch feel should be dropped? Barnett asks.

The Conservative leader says that isn't the first question to ask - she says that a shrinking economy is "causing a problem that needs to be fixed".

She says that Labour "went after businesses" when it introduced the rise in National Insurance Contributions which came into force in April.

Badenoch repeatedly declines to say, however, whether the Conservatives would reverse the rise, simply that "we wouldn't make the mess in the first place".

Finally, Reeves is asked about her pledge to end the use of "costly" hotels for asylum seekers by the next election.

The chancellor says the government has "massively uplifted" the number of people being deported, adding: "We shouldn't be paying for asylum seekers to be in hotels.”

You'll just be paying for them to be in rented accommodation instead, the BBC's Charlie Stayt suggests.

"Not if we're deporting them - we have massively stepped up deportations," Reeves says, but also adds that people need to be stopped from entering the UK illegally in the first place.

It's put to Reeves that small boat crossings are up - she responds by saying £250m was put into Border Security Command in the Spending Review to crack down on criminal gangs.

And with that, the interview comes to an end.

• The government spent £8m a day on hotels for asylum seekers in 2023/24 - read BBC 's analysis here

BBC Breakfast presenter Charlie Stayt pushes Reeves again.

“Police chiefs have made it clear,” he says. “They've looked at the numbers, and they've said officer headcount will fall because of the way you've allocated the budget.”

Reeves says the 2.3% increase for the police is above inflation - around £2bn extra.

She again says not everyone was able to get "everything they wanted" in the Spending Review, but calls it a fair settlement, aimed at "bringing back control" to the public services.

• Police forces argue that most of the extra money will be swallowed up by pay rises, our home editor Mark Easton wrote earlier

Reeves is now being pushed on police spending.

The Police Chief Council says that decisions made in the Spending Review will end up cutting police head counts - how does she respond to this?

The chancellor says that she doesn't accept that claim and that there is no reason for numbers to decline, since police spending power is going up significantly.

"I wasn't able to say yes to everything people asked for, but my job is to make sure the sums add up," she says.

Next, Reeves is pushed on council tax.

She's asked about comments from the independent think tank, the Institute for Fiscal Studies, which says some spending is based on an assumption that council tax will rise by 5% a year in each year going forward.

Reeves says the 5% cap in council tax was introduced by the last Conservative government, and councils don't have to put tax at that rate.

That money is used to invest in social care, but also to put money into policing, which she says the government invested in yesterday.