Kemi Badenoch has suggested council tax rises could be needed after claiming local authorities face a £2.4 billion “black hole” next year.

The Conservative Party leader used Prime Minister’s Questions to press Sir Keir Starmer about the Government’s funding plans for councils in England, including whether a cap on council tax would be increased or not.

Prime Minister Sir Keir said Mrs Badenoch “wants all the benefits” of the Budget but will not say how she would pay for it, before later accusing the Opposition leader of asking “fantasy questions”.

I know that he has been away, but did the Deputy Prime Minister who runs that department make him aware of their £2.4 billion black hole?”

The Conservatives cited responses to written parliamentary questions in which ministers said estimated core spending power (CSP) for local government will increase from £64.7 billion in 2024/25 to £68.4 billion in 2025/26, with the party adding the Budget was not providing enough new funding to cover this.

Ministers have said the CSP is subject to data changes and final figures will be published as part of the 2025-26 local government finance settlement.

Speaking at PMQs, Mrs Badenoch asked: “Will the Prime Minister confirm that he will keep the cap on council tax?”

Sir Keir, in his reply, said: “On the question of councils, she knows what the arrangements are.”

Mrs Badenoch responded: “I think the House would have heard that the Prime Minister could neither confirm nor deny whether the cap on council tax was being raised.”

Mrs Badenoch went on to ask how much extra money local authorities will have to raise to cover the “social care funding gap” created by the Chancellor’s Budget and increases in employers’ national insurance.

Sir Keir, who had earlier answered a question from Liberal Democrat MP Christine Jardine (Edinburgh West) on healthcare funding, replied: “It’s all very well this knockabout but not actually listening to what I’ve said three minutes ago is a bit of a fundamental failure of the Leader of the Opposition.

“I just said £600 million. I repeat it: £600 million.”

Mrs Badenoch highlighted warnings over the risk of increased costs for care providers before Sir Keir accused the Tories of leaving local authorities in an “absolutely catastrophic state”.

Let me get this straight, (the Leader of the Opposition) doesn’t want any of the measures in the Budget, but she wants all the benefits. So the magic money tree is back after two weeks in office. (The Tories have) learned absolutely nothing

The Conservative leader later said: “The Prime Minister probably does not realise that, on Monday, the Ministry for Communities, Local Government and Housing revealed that councils will need to find an additional £2.4 billion in council tax next year. That is a lot more than £600 million.

“I know that he has been away, but did the Deputy Prime Minister (Angela Rayner) who runs that department make him aware of their £2.4 billion black hole?”

Sir Keir replied: “Let me get this straight, she doesn’t want any of the measures in the Budget, but she wants all the benefits.

“So the magic money tree is back after two weeks in office. They’ve learned absolutely nothing. We put forward a Budget which takes the difficult decisions, fixing the £22 billion black hole that they left, investing in the future of our country.

“They say they want all of that, but they don’t know how they’re going to pay for it – same old Tories.”

Mrs Badenoch accused the Government of having “fiddled the fiscal rules” before highlighting how the rise in employers’ national insurance would be a “disaster” for small businesses.

(The Prime Minister's) Cabinet ministers are all queuing up for public sector bailouts to his tax mess

The Opposition leader later said: “Their ideological Budget was designed to milk the private sector and hope nobody would notice.

“Now his Cabinet ministers are all queuing up for public sector bailouts to his tax mess. If he is going to bail out the public sector then can he tell us this: does he think it is appropriate – as the Ministry for Housing has done – to approve a four-day week for councils that is not flexible working, but is actually part-time work for full-time pay?”

Sir Keir replied: “Questions based on what we’re actually doing are usually better than fantasy questions made up.

“What did they deliver in 14 years? Low growth, a stagnant economy, a disastrous mini budget, a £22 billion black hole and now she wants to give me the advice on running the economy?

“I don’t want to be rude but no thank you, very much.”

The Government last week dropped official concerns about South Cambridgeshire District Council’s four-day week after the authority faced opposition from the previous Tory administration.

Speaking after PMQs about the council tax cap, the Prime Minister’s press secretary told reporters: “The threshold remains the same.”