At a glance...
• Kensington and Chelsea Council plans to make low-income residents pay council tax for the first time and double bills for second-home owners to address a £139 million funding gap
• The council blames Government funding cuts under the Fair Funding Review, warning of inevitable tax rises and service reductions
• London Councils warn the capital faces a £4.7 billion shortfall by 2029, with many boroughs at risk of bankruptcy or needing emergency Government bailouts.
Thousands more vulnerable Londoners face paying council tax for the first time while some residents will see bills double as local authorities are forced to make “tough decisions” to balance the books.
Kensington and Chelsea is the latest to propose new measures in a bid to fill an estimated £139 million budget blackhole by 2029/30.
The town hall is blaming planned Government cuts to the way it is funded.
Kensington and Chelsea’s plans will see the poorest residents who receive up to a 100% discount on their council tax bills face having to pay for the first time.
The local authority is also proposing to follow in the footsteps of Wandsworth, Westminster and Hackney and double the council tax bills of second home owners in the borough.
“Given the financial position the Government’s funding cuts have put the council in, we are now also reluctantly considering charging a council tax premium on second homes within the borough as well as exploring difficult options around reducing our council tax reduction scheme,” Kensington and Chelsea’s draft budget papers state.
At present, many pensioners and the worst-off working Londoners are exempt from paying any council tax due to the extent of their poverty.
About 8,000 working-age households in Kensington and Chelsea currently receive support, which will be reduced by 10% under the plans. General council tax bills in the borough are expected to rise by 5% in April 2026.
In the last financial year almost half of the 33 boroughs said they were looking to make changes to their “council tax reduction schemes” as they desperately try to plug spending gaps amid financial challenges.
These included Chancellor Rachel Reeves’ hike in the amount of National Insurance paid by employers, and an inflation-busting hike in the London living wage.
Elizabeth Campbell, leader of Kensington and Chelsea Council, said: “We are facing cuts of £82 million because of the Government’s fair funding review. It is our biggest budget challenge yet and it means very tough decisions ahead.
“We will continue to ask Government to change the funding formula to acknowledge the unique pressures that London councils face, like the cost of housing and a population that doubles during the daytime.
“But we won’t get our Government funding confirmed until late December, so we have no choice but to prepare for the worst.
“It is inevitable that services will have to change and taxes will rise, but exactly how and by how much is still on the table. We will be consulting on our budget proposals from November 13, and that is the opportunity for residents to have their say on what matters to them.”
It comes amid warnings that the capital’s town halls will collectively be £4.7 billion short of covering the costs of providing services by 2029, resulting in “inevitable” cuts and council tax rises.
The rocketing price of housing homeless families, increasing social care bills and planned reforms to council funding are pushing many boroughs to the brink, London Councils warned earlier this month.
The cross-party group said a growing number of councils in the capital will require emergency borrowing from central Government to avoid issuing Section 114 notices and effectively declaring bankruptcy.
It predicts that the plans set out in the Labour’s Fair Funding Review 2.0 would significantly reduce London’s collective share of cash from central Government.
This year a record seven London boroughs – Lambeth, Newham, Havering, Croydon, Enfield, Barnet and Haringey - required emergency Government bailouts to stay afloat as the funding gap jumped to £1 billion.
London Councils’ analysis, based on a survey of all 33 London local authorities organised by the Society of London Treasurers, suggests this could rise to 17 boroughs by 2028.
