A London council has warned it may have to impose a 150 per cent council tax rise on residents following government cuts under a new funding settlement, reports BritPanorama.
Hammersmith and Fulham council’s cabinet stated that it would raise its council tax after losing more than half of its government grant under Labour’s “fair funding” review, introduced last year, which allocates more money to areas hardest hit by austerity.
Despite currently having the third lowest council tax in England, a budget report indicated that such a rise would cost Band D households an additional £29.11 a week by 2027/28.
The council is one of six, including Wandsworth and Westminster, that the government has allowed to raise their council tax. Neighbouring boroughs have warned they may need to increase bills by 188 per cent and 200 per cent respectively to cover substantial funding gaps.
Government funding for Hammersmith and Fulham is set to drop to just £72.4 million over the next four years after receiving £150.5 million in 2025/26.
The budget report suggests this proposed council tax increase could generate an additional income of £163.9 million by 2030/31, roughly balancing the budget based on current assumptions.
Alternative scenarios in the report showed that a 100 per cent increase in council tax (£19.40 a week for a Band D property) would still leave a budget shortfall of £46.1 million, while a 125 per cent increase (£24.25 a week for a Band D property) would result in a budget shortfall of £20.6 million.
Councillor Rowan Ree, H&F cabinet member for finance and reform, commented on Tuesday, “The government is aiming to make councils with historically low council tax raise them to the national average. We do not support this.”
He added, “I have therefore been working closely with my fellow councillors, our officers, and our three local Members of Parliament to vigorously challenge the Government to review these measures. We have presented sound evidence that supports our case.”
Despite these efforts, Ree expressed concern over the likelihood that the government’s ‘Fair Funding’ changes will proceed. He is currently exploring all options to comply with the legal requirement to present a balanced council budget for next year and the following years in light of the government’s three-year funding settlement.
“We expect that this funding reduction could be equivalent to losing as much as 40 per cent of our total annual budget of £222 million. At the same time, demand and costs for essential services continue to rise,” he stated.
Ree noted that the council has implemented a ‘Ruthless Financial Efficiency’ programme, which has saved a record £156 million since 2014 by modernising services to reduce council spending.
A spokesperson for the Ministry of Housing, Communities and Local Government stated: “Local authorities decide the level of council tax they wish to set, but we are clear that in doing so they should put taxpayers first. We’ve made over £78 billion available for council finances next year, with the majority of money unringfenced so local leaders can decide how best to spend on their local priorities. And we’re fixing an outdated funding system so funding goes where need is greatest, while protecting councils through the transition and ensuring no area faces a cliff edge.”
