Labour lifts council tax cap in six southern areas

"Labour has granted six areas in and around London the power to make larger council tax hikes after reducing their share of government funding. Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, City of London, and Windsor and Maidenhead will be allowed to raise rates by more than 5% for two years without local voters needing to sign off the move. The authorities are among those expected to lose out under a move to shift more government cash towards deprived areas from next year. Ministers say the shake-up will make England's funding model fairer - but the Conservatives have accused them of wanting to "punish" low-tax councils."

"The new system, to be phased in over three years from 2026, aims to shift a greater share of government funding towards councils in England with higher deprivation and a higher share of properties in lower council tax bands. Labour argues these areas were harder hit when government grants were slashed during the austerity era in the 2010s, and that current funding rules, last updated in 2013, fail to reflect high demand among their residents for council services."

"A tweak to the new rules last month was believed to lessen the blow to inner London councils compared with the original proposals, unveiled in June, including by factoring in housing costs when deprivation is calculated. But the Institute of Fiscal Studies said the six councils granted additional council tax-raising powers were still among those areas facing the largest falls in their share of government funding. The think tank added that more urban and more deprived areas were set to see much bigger increases overall."

Six councils in and around London — Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, City of London, and Windsor and Maidenhead — have been granted permission to increase council tax by more than 5% in 2026 and 2027 without a local referendum. The funding model will be rebalanced over three years from 2026 to shift more government money toward councils with higher deprivation and more properties in lower council tax bands. Ministers describe the change as making funding fairer, while Conservatives call it punitive to low-tax councils. The Institute for Fiscal Studies warns these six still face large funding falls and that more urban, deprived areas will see bigger increases overall.

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