Nottingham City Council is missing out on millions of pounds in Council Tax,  due to the Government not compensating enough for the high numbers of students in the city.

Last year the council lost £13m in Council Tax because student households are exempt from paying. The Government allowed only £5m to compensate for the loss – leaving a shortfall of £8m.

Councils in university cities have always received Government funding to offset the exemption of students from paying Council Tax, but this fund has fallen dramatically as the main Government grant for councils has dropped – in Nottingham’s case by £70m since 2013/14.

Over the same period, the lost Council Tax income from the exemption has risen from over £11m to £13m, while the shortfall in the Government’s compensation funding has doubled from £4m to £8m. This comes at a time when councils are relying more heavily than ever on their income from Council Tax to continue to provide services, due to the drastic cuts in the main Government grant.

With almost 46,000 students in an overall population of 305,000, Nottingham has a higher proportion of students (15%) than any of England’s Core Cities. This means the Council Tax exemption and shortfall in Government compensation creates a greater impact on the council’s ability to provide services for the whole population.

It is expected that the situation will continue to get worse as Government funding continues to fall and the number of student households rises.

Deputy Leader Councillor Graham Chapman said: “We of course welcome students and the vibrancy they bring to Nottingham and for many years we have been adequately compensated for their exemption from paying Council Tax where they are living while they study.

“However, the Government is now leaving us with a significant shortfall, which hits Nottingham harder than many places as students make up a greater part of our population than most large cities. In the last four years, the lost income has increased by almost £2m to £13m while the shortfall has doubled from £4m to £8m.

“This is on top of the disproportionately large reductions in our overall Government funding compared to wealthier areas and the fact the Government missed us out in favour of more affluent councils when handing out transitional funding last year to soften the blow of the cuts.”