A Redistribution With Consequences
The Labour government’s Fair Funding reforms were always going to produce winners and losers. What is now becoming clear, with uncomfortable precision, is just how steep the losses will be for a cluster of London boroughs — and how directly those losses will translate into substantially higher bills for well over a million residents. The central thesis is straightforward: a redistributive funding formula, however defensible in principle, is imposing fiscal shocks on specific councils that their existing tax bases and service structures cannot absorb without dramatic consequences, and the government’s framing of this as a correction of historic subsidy obscures the genuine disruption it is engineering.
Five London boroughs — Wandsworth, Westminster, Kensington and Chelsea, the City of London, and Hammersmith and Fulham — have already received ministerial permission to raise council tax beyond the standard 5% annual ceiling without triggering a local referendum. Bromley has formally requested the same dispensation to address a projected £22 million annual shortfall by 2028/29. Together, these six boroughs encompass a combined population of approximately 1.2 million people.
The scale of the adjustments under discussion is not marginal. Wandsworth Council has announced plans to raise the average Band D council tax from £1,020 to £1,978 from April 2027 — a rise of £958, or 94%. A borough that Margaret Thatcher once celebrated as a model of low-tax Conservative local government, and which has maintained the lowest council tax rate in the country, would in a single year move to roughly average national levels. Westminster City Council, meanwhile, faces what its own finance cabinet member describes as an “unprecedented” £100 million drop in government funding over three years, with internal projections suggesting a council tax rise of between 75% and 100% may be necessary to close the gap.
The Mechanics of the Shortfall
The government’s position is that the previous funding arrangement amounted to a hidden subsidy for affluent parts of London and the South East, and that the new formula simply redirects some £250 million more fairly across the country. Local government minister Alison McGovern made precisely this argument when presenting the changes in the House of Commons in December. The logic is not without merit: there is a reasonable case that central allocation should reflect deprivation and need rather than entrench the advantages of already prosperous areas.
But the Institute for Fiscal Studies, in a February report, noted that the government’s own calculations behind the new formula assumed very large increases in council tax bills for the five affected London councils. That is a significant admission. It suggests the redistribution was designed with the expectation that these boroughs would absorb the shock through local taxation rather than through any transitional relief — an expectation that amounts to a policy choice, not an inevitability. Windsor and Maidenhead is currently the only non-London council to have been granted equivalent flexibility on rate increases, which underlines how concentrated the impact has been on a specific tier of the capital’s governance.
Wandsworth’s town hall has attributed the shortfall directly to an £84 million annual reduction in its government funding. Westminster’s Councillor Paul Fisher has been candid: “We are effectively being forced into making huge savings, with likely cuts and expected council tax increases.” A separate Conservative briefing paper from Westminster suggests the average council taxpayer could face nearly £400 in additional annual charges by 2028/29 simply to plug the £100 million gap. Kensington and Chelsea is consulting residents on whether to mount a legal challenge under the Sustainable Communities Act, a measure that signals the depth of institutional frustration.
Political Accountability and the Redistribution Narrative
The leaders of Wandsworth, Westminster, and Kensington and Chelsea wrote jointly to the Prime Minister last month, arguing that the government is cutting funding while engineering the political conditions under which local councils — not Whitehall — must absorb the blame for subsequent tax rises and service reductions. This is not a trivial point. The design of the reform places ministers in an advantageous position: they can claim credit for a fairer national distribution while the visible pain of higher bills lands on Conservative-run borough councils.
Councillor Elizabeth Campbell of Kensington and Chelsea was pointed in her assessment: “This government is purely about tax, waste, and then tax some more.” Whatever one thinks of the rhetorical flourish, the underlying concern about accountability is substantive. When central government sets a funding formula that predictably necessitates council tax increases of 75% to 100%, but the formal decision to raise rates rests with local authorities, the lines of democratic responsibility become genuinely blurred. Residents in Wandsworth or Westminster may reasonably struggle to determine whether their borough leadership or the Treasury is the appropriate object of their discontent.
The situation is further complicated by the forthcoming mansion tax — a charge on high-value properties due to take effect in April 2028. The leaders of Wandsworth, Kensington and Chelsea, Westminster, and Richmond have argued that roughly half of the projected £400 million in annual revenue from this measure will be drawn from their boroughs, compounding the fiscal pressure on the same communities already absorbing the largest council tax adjustments.
What Comes Next
Bromley’s position illustrates that the pressures are not confined to the five councils already granted special dispensation. Its current Band D rate of £2,140 is already more than double Wandsworth’s, which limits the political and practical room for further large increases, but council leader Colin Smith has acknowledged that a double-digit percentage rise now appears unavoidable. His statement that there is “simply no point in pretending otherwise” reflects a broader exhaustion with the gap between the government’s framing and the fiscal arithmetic councils must actually balance.
The implication is clear enough. The Fair Funding reform may well achieve its stated goal of directing resources toward more deprived parts of England — a goal that carries genuine policy weight. But the mechanism chosen to do so has concentrated a disproportionate and rapid adjustment on a small number of London boroughs, without adequate transitional arrangements, and in a manner that the IFS itself has noted was built on the assumption of very large council tax increases. That is not a correction of an anomaly; it is the deliberate engineering of a fiscal shock, with the political costs distributed to local government. Policymakers and financiers watching the broader trajectory of English local government finance would do well to treat Wandsworth’s near-doubling of council tax not as an outlier, but as a leading indicator.