London council tax shock as another borough seeks permission to exceed 5% cap

A seventh London borough could hike council tax bills above the 5% cap as funding cuts and spiralling costs push budgets to breaking point.

The town hall is predicting an almost £130 million blackhole in its budget by 2029/30 due to rising service costs, driven predominantly by increasing demand for temporary accommodation and social care.

It will take the Tory minority-run borough from having the lowest council tax in the country to around average levels.

Under Labour’s Fairer Funding Review the five London councils with “historically very low bills”, along with Windsor and Maidenhead, will see the cash they receive from central government significantly slashed.

Westminster town hall has said resident bills could have to rise by 200% unless there are major cuts to services.

A Lambeth council spokesman stressed that “no decisions” on council tax rates for 2027/8 have yet been made but added it had “called strongly on the Government to reverse deep cuts to funding, including those made under the so-called 'Fair Funding Review’.”

He added: “These most recent cuts follow a 30% real terms fall in our spending power since 2010.

“Meanwhile, we've seen a massive rise in demand for frontline services, especially temporary accommodation, adult's and children's social care.”

Lambeth is run by the Greens, but the party does not have a majority and relies on votes from Liberal Democrat councillors to get policies approved. Any bill increases would have to be signed off at a full council meeting.

A Lambeth Labour spokesperson said: “The Lambeth Green Party made lots of unfunded promises to get people to vote for them in May, which they are now realising they can’t deliver.

“They should be honest with residents and apologise, rather than secretly trying to clobber them with huge Council Tax bill increases to pay for their mistakes.

“Lambeth Labour was proud to be an administration that championed fairness, transparency and putting residents first. The Lambeth Greens have put their own interests first instead, and now expect our residents to pick up the bill.”

Bromley council has already had “high level talks with senior civil servants” about exceeding the 5% cap the Government puts on council tax bill rises.

The local authority said it will see £30.5m stripped from its funding in real terms by 2028/29 and it is facing by “far the biggest financial challenge” it has ever seen.

Tory council leader Colin Smith said: “The Government’s decision to reduce Bromley’s funding by over £30m by 2028 leaves us with no other viable option than to consider a higher than desirable council tax increase and that is the painful exercise we have now had to embark on.”

Standard council tax increases are capped in England at 5%, with 3% going to local authority budgets plus 2% for the adult social care precept.

If a local authority wants to increase bills by more than this they usually have to hold a referendum and get residents to agree.

But the Government can lift this cap for councils under special circumstances.

Croydon controversial upped council tax by 15% in 2023 after the borough was forced to declare itself effectively bankrupt for a third time.

In Newham, council tax increased by 8.99% last year.

The Ministry for Housing, Communities and Local Government said it treats conversations with councils about their financial positions in confidence.

A Government spokesman added: “Local authorities decide the level of council tax they wish to set, but we are clear that in doing so they should put taxpayers first.

“We’ve made over £78 billion available for council finances next year, with the majority of money unringfenced so local leaders can decide how best to spend on their local priorities – alongside fixing an outdated funding system, so funding goes where need is greatest.”