Five London boroughs and one unitary with low council tax rates have been offered council tax flexibility, as the government unveiled a £78bn local government finance settlement for next year.
Wandsworth, Westminster, Hammersmith and Fulham, City of London, Kensington & Chelsea LBCs and Windsor and Maidenhead RBC have been told they can increase the amounts residents pay by more than the 5% allowed without a referendum in 2027-28 and 2028-29.
Over the three year settlement period council tax rises will be capped at 3% per year with an extra 2% for adult social care. Authorities where residents pay less than the average council tax can apply for permission to raise their rates above this limit.
The 2026-27 settlement is the first year of a multi-year settlement with allocations for 2026-27, 2027-28 and 2028-29 due to published this afternoon.
The Ministry of Housing, Communities & Local Government said that over the course of the settlemen, councils would see a 23% increase in their overall core spending power and the most 10% of councils will see a 24% per head boost to the funding available.
Communities secretary Steve Reed said: “This is a chance to turn the page on a decade of cuts, and for local leaders to invest in getting back what has been lost – to bring back libraries, youth services, clean streets, and community hubs.”
MHCLG confirmed that the £600m recovery grant, introduced last year, will continue throughout the three-year settlement alongside a new recovery grant guarantee with above-inflation increases for upper tier councils whilst they adapt to the new funding system.
Minister of state for local government and homelessness, Alison McGovern said: “Deprivation doesn’t happen by accident – it’s the result of years of broken systems and wrong priorities. This settlement tackles that head-on by directing funding where it’s needed most.
“By fixing the link between funding and deprivation, we’re giving local areas the tools to create opportunities, support families, and rebuild the services that hold communities together. This is how we deliver a fairer Britain where everyone has the chance to succeed.”
Other changes in the system include allowing councils to keep all additional council tax from new homes and £4.6bn for adult social care by 2028-29, which includes £500m to improve care workers’ pay.
A written ministerial statement is expected later today, which will be followed by a debate in the Commons.
