Thousands of Londoners face 32% increase in council tax to plug shortfall in government funding

Thousands more Londoners face hikes in council tax as three London boroughs look to plug holes left by new government spending rules.

Councils in Barnet, Bromley, and Lambeth have all asked the Government permission to increase council tax by more than the 5% national cap.

All three councils have turned to residents to make up the shortfall after the introduction of the Fair Funding Formula.

The controversial framework was officially launched by Angela Rayner in June last year, but has faced criticism of how it reduces funding for areas deemed to have higher revenue-raising potential.

London Councils have been significantly impacted by shortfalls in central government funding

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Councils have claimed the formula does not account for factors such as homelessness or cost of living and has meant several London councils have been forced to increase council tax to cover the drop in central government spending.

Councils must request permission from the Government to increase taxes above the cap. Wandsworth and Hammersmith & Fulham councils have already been given the green-light for huge increases in council tax earlier this month - by 94% and 150% respectively.

Now, Barnet Council is looking to do the same, proposing a 32% increase in council tax, making its average band D bill £2,060, up from £1,622.

The north London council faces a £200 million shortfall by 2030, largely driven by a cut in government funding and rising social care costs.

In a social media video shared by the council, the borough revealed that it spends 18 times as much money on children’s services than libraries.

Bromley Council is also proposing an unspecified hike on council tax to offset the funding cut, which is projected to reach £30 million per year.

Green-led Lambeth is also projected to face a £130 million deficit in its funding by 2029-30, making it the third council to seek an unspecified tax increase.

Barnet in particular has been dependent on £135 million of emergency loans from the government to avoid bankruptcy.

Barnet Council

Simon Radford, Barnet Council’s cabinet member for financial sustainability, told The Times: “The task is mammoth. We need to find £200m of savings or cost avoidance within three years. We need to make some very painful decisions in the coming months and years, and to have a brutally honest conversation with residents.”

Council leader for Bromley, Colin Smith, told the same publication: “The government’s decision to reduce Bromley’s funding by more than £30m by 2028 leaves us with no other viable option than to consider a higher-than-desirable council tax increase. That is the painful exercise we have had to embark on.”

Hammersmith and Fulham have already considered adding £29 a week to council tax in a report announced earlier this month.

The Labour council concluded that it is losing more than half of its Government grant under the Fair Funding framework.

There are concerns that Andy Burnham’s government could reduce the threshold on mansion tax

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It comes as Prime Minister Andy Burnham’s Government faces pressure over how policies could disproportionately impact the capital.

Policies set to come into play, like the “mansion tax” in 2028, will mean properties valued above £2 million will be charged an additional levy.

London already accounts for a significant proportion of the homes set to be hit by the tax.

The Ministry of Housing, Communities and Local Government said: “We’re fixing an outdated system so that funding goes where need is greatest, while protecting councils through the transition and ensuring no area faces a cliff edge.

“For London councils, we’re making £11.5 billion available — that’s more than a 38 per cent increase since 2024-25 — in recognition of the particular pressures facing the capital, such as the high costs of temporary accommodation.”