Westminster City Council, a high-profile central London borough, has warned that council tax could potentially double due to a significant reduction in its central government grant. The council, run by the Conservative party, stated it faces "stark and very tough choices" as its annual grant is set to be slashed from £219 million to £119 million by the 2029-30 fiscal year.
This funding realignment is part of a broader shake-up announced for England, which diverts central cash to areas classified as more 'deprived'. The government asserts that Westminster should cover more of its costs through its own revenue streams, which include approximately £2.5 billion annually in business rates. Westminster City Council, however, argues that the government has overlooked the area's high rates of poverty and social challenges, as well as the costs associated with managing tourism.
Westminster has been granted 'funding realignment powers' along with five other authorities, allowing them to increase council tax by more than the standard 5 per cent cap for the next two years. This change puts pressure on generally more affluent authorities that have previously maintained lower council tax bills. The Tories have criticized this overhaul as a "naked power grab" intended to benefit "badly-run Labour councils that spend irresponsibly."
Paul Fisher, a cabinet member for Westminster City Council, indicated that the government's assumption is that the council will raise council tax by 75 to 100 per cent to address the immediate budget shortfall. He noted that while specific council tax levels for the upcoming year have not yet been finalized, the current financial climate is unprecedented and leaves few easy options. Fisher added that efficiency measures alone will not suffice to cover the budget deficit in the coming years, necessitating a consultation with residents regarding their willingness to pay higher bills.
"We charge the second lowest council tax in the country, provide cost efficient services and collect more than £2.5 billion in business rates – yet we are effectively being forced into making huge savings, with likely cuts and expected council tax increases," Fisher stated. He also mentioned that even a doubling of council tax would still leave Westminster with one of the lowest rates in London and the country.
Westminster City Council, which currently charges £1,047 a year for a Band D property, plans to consult residents this summer on which services they value most and their willingness to accept higher tax bills. Among the properties that could be affected by increased bills are the Prime Minister's Downing Street residence and flats owned by Members of Parliament in the Westminster area.
The Local Government Association has warned that despite these funding reforms, councils across England are facing a £7 billion funding deficit within three years, a figure exceeding the combined current spending on roads, transport, homelessness, and housing services.
The five other councils granted funding realignment powers are the City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, and Windsor & Maidenhead. In total, seven other councils have received permission to increase council tax by more than 5 per cent.
Conversely, the most deprived 10 per cent of councils are projected to receive a 24 per cent per head increase in central funding. Significant increases in core spending power are expected for councils such as Birmingham, Bradford, Barking and Dagenham, Coventry, and Enfield, among others. Conversely, councils like Ashfield, Ashford, Harborough, and Runnymede are among those facing percentage decreases in core spending power.
Many county and district councils, some already facing financial instability, have expressed concerns that these new arrangements will intensify their pressure.