Council tax bills in London could soar by 75% after Government funding changes

Residents in Kensington and Chelsea, Hammersmith and Fulham, Wandsworth, Westminster and the City of London, will see their levies ramped up as their local authority's see their resources cuts.

An eye-watering 75 per cent rise in council taxes could be seen in some London boroughs, according to the Institute for Fiscal Studies.

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"The funding figures assume some very large increases in council tax bills indeed for these councils – around 75 per cent in the case of Wandsworth and Westminster," the think tank said.

The six town halls can increase council tax above the 5 per cent limit without a referendum, potentially pushing bills far higher to cover funding shortfalls.

Residents in these boroughs are also likely to be hit by the Government's new mansion tax.

Defending the rises, ministers said these councils had "historically very low bills" and their leaders will be given "flexibility" for two years to increase them above 5 per cent cap.

Town halls will be encouraged to double tax payments for second home owners, a move already made by Westminster and Wandsworth.

London boroughs have warned residents they face making significant cuts and increasing charges for services.

Vulnerable residents in Kensington and Chelsea face paying council tax for the first time, as councillors face "tough decisions" to balance the book by 2029/30 while preparing to lose about £16.8 million in funding over the next three years.

It means some of the poorest residents, who have previously received up to a 100 per cent discount, may be required to pay council tax for the first time.

Kensington and Bayswater Labour MP Joe Powell told the Standard: “The Government has listened and agreed a funding package that reflects the reality of demands for services in central London.

“I'm disappointed that Tory-run Kensington and Chelsea Council jumped the gun by proposing cuts to services and support that all our residents rely on before knowing the reality of the financial picture.

“I now urge Kensington and Chelsea's leadership to abandon these reckless plans, and instead introduce the second homes Council Tax premium that almost all London councils already charge.

“Ending this second homes tax break in Kensington and Chelsea would raise £12 million each year, more than enough to protect vital services like youth clubs and low income household support, and cover other demands the council expects it will need to meet over the next three years."

The cuts will help fund almost £78 billion for councils elsewhere in England, with more money directed towards deprived areas.

According to the Ministry of Housing, Communities and Local Government (MHCLG), local authorities will see a 23 per cent increase in core spending power compared with 2024/25 by the end of the multi-year settlement.

This funding can be used for services such as bin collections, housing and children's services.

Local Government Secretary Steve Reed said: "This is a chance to turn the page on a decade of cuts, and for local leaders to invest in getting back what has been lost, to bring back libraries, youth services, clean streets and community hubs.

"Today we're making sure every community has the funding they need to succeed."

Last year, a £600 million Recovery Grant was introduced to help areas hit hardest by underfunding and will continue throughout the three-year settlement.

Upper-tier councils will also receive money from a new Recovery Grant Guarantee, providing above-inflation increases as they adapt to the new system.

Council tax increases will continue to be capped at 3 per cent, with an additional 2 per cent allowed for adult social care.

However, London boroughs warned they were "grappling with a £1 billion budget shortfall" this year alone.

Claire Holland, Chair of London Councils, said: "Delivering the first multi-year settlement in ten years is an important step in the right direction and the changes made to the original funding reform proposals will ensure the funding allocated through this settlement better reflects demand for local services.”

She added: "Despite the positive progress being made, the outlook for council finances in London remains extremely challenging.

"We are grappling with a £1 billion budget shortfall this year and more and more boroughs are likely to require emergency borrowing to plug the gap.

"Stabilising our budgets is critical for sustaining local services, building affordable homes and driving the economic growth we all want to see in our communities."