More than 1.2 million Londoners face massive council tax hike next year

More than 1.2 million London residents could face eye-watering increases in their council tax bills as local authority leaders look to plug black holes in their budgets.

Five London boroughs have been given permission by government ministers to hike council tax by more than 5%, the usual ceiling for increases, without requiring a local referendum to address central government cuts.

A sixth, Bromley Council, has asked the Ministry of Housing, Communities & Local Government to be given the same ability.

Wandsworth Council, one of the councils given special dispensation, has announced that council tax bills are set to double for residents next year.

Wandsworth Council said council tax will double for the average household in 2027/28

Charlotte Lillywhite/LDRS

It will take the Tory minority-run borough - which was once hailed by Margaret Thatcher as her favourite local authority - from having the lowest council tax in the country to around average levels.

Wandsworth town hall blamed the Labour government’s Fair Funding reforms - which will see spending shifted from affluent parts of London and the South East to more deprived parts of the country - for reducing the borough's funding by £84million a year.

Four other London councils find themselves with a similar deficit following the Fair Funding shake-up. Kensington and Chelsea, Westminster, City of London and Hammersmith and Fulham have also been given the green light to go beyond the 5% cap for rate rises.

Officials wrote to 200,000 households to see what council services voters value most as it looks to decide what public services to try and save amid tough cutbacks.

The government has defended the new funding formula, arguing that central government had effectively previously been “subsidising” low council tax areas to the detriment of other parts of the country.

When announcing the changes in the House of Commons in December, local government minister Alison McGovern said the change would allow the government to “allocate more than £250million of funding in the system more fairly”.

We are effectively being forced into making huge savings, with likely cuts and expected council tax increases

Councillor Paul Fisher, Westminster City Council, cabinet member for finance

The Institute for Fiscal Studies, in a report published by the economic think tank in February, stated that government calculations behind the new formula “assumed some very large increases in council tax bills” for the five councils in London. Windsor and Maidenhead is the only non-London borough to so far be given the same council tax rising power.

Wandsworth’s increase could be an ominous sign of what is to come for rate payers in the other four affected councils in the capital.

Westminster City Council has, along with Wandsworth, boasted one of the lowest council tax rates in the UK.

Councillor Paul Fisher, Westminster’s cabinet member for value for money and finance, said efficiencies and savings alone were unlikely to allow the local authority to present a balanced budget. A consultation with residents is due to close on September 30.

“The government assumes we are now going to put up council tax by 75-100% to make up our immediate budget shortfall,” said Mr Fisher.

Council tax bill holders are facing a huge rise

“Whilst we have not yet settled on council tax levels for next year, this new financial climate is unprecedented and presents us with stark and very tough choices ahead where there are no easy options ”.

In a separate briefing paper from the City of Westminster Conservatives, the party suggested that the average council taxpayers would pay almost £400 extra per year by 2028/2029 to plug the £100million gap.

Mr Fisher said there was “no easy option here and no horizon in which we do not have to make savings”.

He added: “We are effectively being forced into making huge savings, with likely cuts and expected council tax increases.”

A spokeswoman for Kensington and Chelsea said no decisions had been taken on council tax levels for 2027/28, with councillors to deliberate over the autumn before their proposals are put to public consultation.

The west London council is also consulting with residents on whether to legally challenge the cutbacks, using the Sustainable Communities Act.

Local government minister Alison McGovern said the new funding system would be fairer (Getty Images)

AFP/Getty

Councillor Elizabeth Campbell, leader of Kensington and Chelsea Council, said: “Like Wandsworth and Westminster, we now have difficult decisions to make, but clearly not the freedom to make the decisions that are right for us and right for our residents.

"Devolution? What devolution? This government is purely about tax, waste, and then tax some more."

The challenging budget conditions come at the same time as the Treasury prepares to introduce the so-called mansion tax.

Wandsworth, Kensington and Chelsea, Westminster City Council and Richmond leaders have argued that the charge on homes, coming into effect in April 2028, will raise half of its forecast £400million revenue from their London boroughs.

On the question of council tax, Bromley has held talks with ministers about wanting to also be given permission to increase rates beyond the 5% threshold to fill the £22million annual shortfall by 2028/29 created as a result of reduced government funding.

In a statement issued to The Standard, Tory council leader Colin Smith looked to assure Bromley residents that any increase would be “nowhere near” that of Wandsworth’s. He has previously said, if given the go-ahead by ministers, “we would have to consider a double figure rise”.

Mr Smith said, “Sound financial management requires sound financial planning and the next few weeks are increasingly critical for us as well, as we have still to hear back from government following our request to have the same freedom already granted to other London boroughs.

“Whilst I am relieved to re-assure Bromley residents that our additional requirement would be nowhere near the magnitude of the amount reportedly being called for by Wandsworth, we have now reached the stage where we are going to have to raise tax by more than 5%, cut services, or more likely both and there is simply no point in pretending otherwise.”

Bromley’s annual bills are currently more than double those in Wandsworth and Westminster, costing the average Band D household £2,140.

The City of London said it had welcomed the decision to award it “additional funding” as part of its government settlement.

A spokesman said the cash injection “recognises our vital responsibilities on behalf of London and the wider UK”, with the authority responsible not just for what goes on within the Square Mile but also maintaining places such as Epping Forest and Hampstead Heath.

The Labour-run Hammersmith and Fulham Council declined to comment about its council tax setting process.