Councils will face difficult decisions over the next couple of months as they set their budgets – with Bury residents waiting to see the difference in their new council tax bills.

It comes at a time of financial uncertainty over future funding for local authorities as public sector cuts loom.

Inflation – and in particular, the spiralling cost of energy – has affected local authorities as it has all organisations.

But demand for their services is also increasing as the residents they represent feel the impact of inflation too.

Perhaps one of the most unpopular choices town halls will have to make is whether to balance the books by raising council tax and, if so, by how much.

For many councils, this might be needed to plug the gap in their budgets, but it comes at a time when many are struggling because of the cost of living crisis.

Local authorities are allowed to raise council tax by up to five per cent from April – any higher than that, and a referendum would be held – which is made up of a 2.99 per cent increase plus an additional two per cent that is ringfenced for adult social care only.

On top of this, metro mayors like Andy Burnham can add to the bill by raising rates for the police, the fire service and other schemes such as transport.

However, in poorer parts of the country – predominantly in the North of England – raising council tax does not generate as much money as elsewhere.

This is because council tax is calculated according to property values set in the 1990s with households which were the least valuable paying the lowest rate.

In Greater Manchester, nearly two thirds of households are classed in the lowest two bands of council tax which means that less money is collected.

And of the money that is owed in council tax, as little as 90 per cent is actually collected in places like Manchester where more people struggle to pay. 

The "double whammy", as one Labour source puts it, is that people in poorer parts of the country often require more services from their local authorities.

Furthermore, local authorities claim that if they do not raise council tax by the full amount available, the government would assume they have more money than they actually do and this could  affect the funding it receives in the future.

The government has said this assumption is "incorrect", but admits that future funding decisions are based, in part, on the level at which council tax is set at.

Over the coming weeks and months, local authorities will announce what level they want to set council tax at in the next financial year with the final decision to be voted on by councillors in each borough no later than March.

Greater Manchester mayor Andy Burnham is also asking for an annual increase of at least £10 for all ratepayers in the city-region to help fund Greater Manchester Police. This increase – which is £15 for Band D properties – is the maximum allowed.

An announcement about the other council tax precepts set by the Labour mayor is expected to be made later this month.

In Bury, the latest draft of the council’s medium-term financial strategy published in November, assumed a council tax increase of 1.99 per cent for its portion of the bill.

However, the document assumed that raising the ringfenced adult social care precept would not be allowed in next year as this was due to end in 2022/23.

Nevertheless, the autumn statement confirmed that the adult social care precept would continue with Chancellor Jeremy Hunt referring to this as "flexibilities" for councils which would help put £7.5bn into social care.

The council said that the assumptions in its medium-term financial strategy would be refined and confirmed before the budget is finally set on February 15.