The City of London Corporation has issued a stark warning that it may be forced to conduct a 'wholesale review' of the services it provides after the Government dramatically slashed its funding allocation. The central London council said the scale of the financial shortfall is so severe it necessitates a potential 'bottom up' assessment of its entire operation.
A Drastic Reduction in Funding Assessment
According to a report presented to the council's Finance Committee, the Government's new funding methodology has had a devastating impact. Authorities removed the daily needs of the commuter population from their calculations, leading to a 76% drop in the City's assessed need. This plummeted from £77 million to just £18 million for the 2026/27 financial year.
Compounding the issue, the Corporation revealed it only received a one-year funding settlement, while most other local authorities were granted three-year deals. The report stated there was 'no prior notice' of this change, making budget planning for 2026/27 and beyond extremely difficult.
Uncertainty Prompts Radical Rethink
Presenting the findings at a committee meeting on Tuesday, 13th January 2026, a senior City officer left members in no doubt about the gravity of the situation. 'Members, you need to be aware that the level of uncertainty around this could mean as much as a wholesale review of what we do as a local authority,' she said.
'This is not something where we can play around the edges with savings, this is categorically 'what services does this organisation provide as a local authority', potentially bottom up,' the officer added, indicating that no service area would be immune from scrutiny.
Council Tax Powers and Wider Services
The report highlighted that even drastic measures like doubling council tax would only generate an additional £5 million, a fraction of the shortfall. Although the City is one of six authorities permitted to raise council tax above 5% without a referendum, it has stated it will not exceed this limit in 2026/27.
The City of London Corporation also emphasised its role in providing services for the whole capital and nation, which it will use to lobby for more funds. These include:
- The London Archives
- The Heathrow Animal Reception Centre
- The Port Health Authority
- Funding for the Barbican Centre
- Its own police force
- Residential estate, community, and children's services
With an overall budget of £324.8 million, the authority said the Government deemed it 'too much of an outlier' for standard arrangements, leading to a one-year deal on 'value for money grounds'. Ministers have now agreed to a 'bespoke' funding deal for future years.
