Westminster City Council has warned that council tax could double in the central London borough to prevent cuts to services, after the government redirected funding to deprived areas. The council faces 'stark and very tough choices' as changes from the 'fair funding' review of council allocations will halve its annual central grant from £219 million to £119 million by 2029-30.
Current council tax rates and funding challenges
The council has one of the lowest average council tax rates in the country, with Band D properties currently charged £1,047 a year. Despite collecting more than £2.5 billion in business rates, the council argues that the government's fair funding calculations overlook high rates of poverty and social challenges in the borough and fail to account for pressures from one million daily visitors.
The then Labour-led council voted earlier this year to freeze its share of council tax for 2026/27, though a 2 per cent rise in the social care precept was imposed. The Conservatives regained control in the May local elections, winning 32 of 54 seats.
Funding realignment powers and consultation
Westminster, along with five other councils, has been granted two-year 'funding realignment powers', allowing it to increase council tax beyond the usual 5 per cent threshold. This effectively signals government expectation of a significant hike to make up for lost funding, the council said. It will consult residents this summer on which services they value most and their willingness to pay higher bills.
Cabinet member Paul Fisher stated: 'The Government assumes we are now going to put up council tax by 75–100 per cent to make up our immediate budget shortfall. 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.'
Impact of cuts and government response
Fisher added that 'extensive efficiencies and transformation plans' would not cover the budget shortfall, so residents will be asked if they are prepared to pay more council tax. He said: 'Whilst we will continue to fight for Westminster residents and take our case to the government, we need to be honest that there is no easy option here and no horizon in which we do not have to make savings. 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. Even if we doubled our council tax, we would still be one of the lowest in London and the country.'
A Labour source countered: 'The fair funding formula is about directing money to the areas in Britain's most deprived communities around the entire country. I don't think even Westminster council would think that they are top of that particular list.'
Broader context of council funding
The Local Government Association reported that despite the funding reforms, councils in England face a £7 billion funding black hole within three years, a gap larger than the current council spend on roads, transport, homelessness, and housing services combined. The four other councils granted funding realignment powers are City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, and Windsor & Maidenhead. A total of seven other councils have been permitted to increase council tax to a specific level.
