Council tax bills across the country could skyrocket by £225 each year under the Labour Party's proposed overhaul of workers rights, according to a leading think tank.
The Policy Exchange claims plans drawn up by the party's Deputy Leader Angela Rayner to introduce "sectoral pay bargaining" will push up the cost of social care by nearly £10billion.
Some 40 per cent of this hiked cost would trickle down to the taxpayer through hikes to council tax, the research suggests.
This comes at a time when local authorities are under unprecedented financial pressure with one in five councils reportedly at risk of "bankruptcy" due to rising interest costs and reductions in spending power.
Two years ago, Rayner published Labour's "New Deal for Working People" which the Official Opposition proposing fair pay agreements via sectorial collective bargaining which would start with social care.
This deal will “establish minimum terms and conditions” which would legally cover all workers in the sector and cover “pay and pensions, working time and holidays, training, work organisation, diversity and inclusion, health and safety, and the deployment of new technologies”.
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Council tax bills could rise significantly under Labour's worker rights proposals
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Wage negotiations will be negotiated with trade unions and would apply to all businesses working in the sector, even if unions only represent a small fraction of the workforce. These rules would also apply to workplaces with no union members.
When it comes to the social care sector, Policy Exchange believes the unions' starting point will likely be the call from the Trade Union Congress in August for a £15 per hour "new sectoral minimum wage".
Based on the organisation's research, the total bill resulting from this wage rise for the industry in 2023-25 would come to at least £9.9billion annually.
If this amount was to be paid by a council tax rise, Policy Exchange estimates it would lead to a 10.9 per cent increase, coming to a £225 yearly rise for the average Band D household.
The think tank warned that raising wages without increasing output or productivity will end up “stoking inflation” in the UK which has eased to 3.2 per cent.
As such, any benefit of the pay rise for social care workers would likely be cancelled out.
Roger Bootle, head of the Policy Programme for Prosperity at Policy Exchange, explained: "The international evidence is clear: sectoral pay bargaining is an especially harmful form of collective bargaining when it comes to labour market flexibility and productivity growth, and it is largely ineffectual at increasing real wages.
"No government genuinely committed to increasing the prosperity of the UK could contemplate such an act of economic self-harm."
Iain Mansfield, the director of Research at Policy Exchange, called for Starmer's party to be honest about how it plans to fund its plans in Government, especially after their attacks on Conservative unfunded fiscal plans.
He said: "Labour needs to say how they will pay for their plans to introduce sectoral collective bargaining.
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Local authorities have been forced to raise council tax due to rising costs
GETTY“Are they planning to raise taxes – in which case, which taxes – or to borrow more?
"If growing the economy is genuinely their number one priority they cannot afford to introduce such inflationary and economically destructive policies.”
A Labour spokesman said: “These claims are based on fiction and don’t reflect Labour policy. The real risk to people’s pockets is the £46-billion unfunded Conservative pledge to abolish National Insurance.“
"After 14 years of Tory failure to fix the broken adult social care sector, Labour’s new deal will lay the groundwork for better conditions that end the race to the bottom in care and offer the dignity and respect these crucial workers deserve.”
