At a glance
• The Greater London Authority faces a £19.2 million funding gap for 2026/27, prompting a review of all activities and potential staff redundancies
• The mayor’s share of council tax is set to rise by at least three per cent, pushing average annual payments above £500, while funding for free school meals for all London primary pupils will be retained
• Ongoing uncertainty over Government funding and lost post-Brexit “parachute payments”, new office costs and potential losses at West Ham’s stadium have contributed to the financial crisis
The Greater London Authority is facing an unprecedented financial black hole of more than £19m with jobs at risk as it tries to balance the books, Sir Sadiq Khan's draft budget for the next financial year reveals.
The Standard revealed last week that all 1,500 City Hall staff received an email from the chief officer warning them that job cuts were a possibility due to the extent of concern around a shortfall in funding for the 2026/27 financial year.
Now full details of the feared budget shortfall have been published – a gap of £19.2m, even after using up £4.7m of reserves.
The mayor’s share of council tax is expected to rise by at least three per cent – which would take the amount the average household would pay to City Hall well above £500 a year.
Funding for free school meals for all London primary school children in State schools – one of Sir Sadiq’s flagship policies - has been retained, funded by business rates and the ongoing use of GLA reserves.
But “all activity” carried out by GLA staff is now being reviewed to ensure the organisation focuses on the mayor’s strategic priorities.
The draft budget states: “It is possible that this programme of review and transformation will result in cuts to GLA posts.
“GLA staff will be understandably concerned about what this potentially means for them. We are still developing options for implementation in the context of such uncertainty about our funding levels.”
The proposals, which will be scrutinised by the London Assembly’s budget committee next Tuesday, do not give a figure for the number of jobs at risk.
However, they clearly hint that some staff may have to be made redundant.
“Where roles may be impacted, we are committed to supporting affected staff through clear communication; redeployment opportunities; and, where necessary, a tailored support package,” the draft budget states.
“The mayor and senior officers remain committed to transparency with the Assembly throughout the budget process.”
Neil Garratt, finance spokesman for the City Hall Conservatives, said: "Even if all the unknowns pan out optimistically, I don't see how City Hall can close the budget gap without severe cuts.
“This is now dawning on Khan's top team. When the final numbers are in, this Labour government's first full year will have given us the most brutal financial settlement in the GLA's history. At least, until next year."
City Hall’s annual revenue budget is around £900m a year. The plans indicate further cuts to day-to-day spending are likely in 2027/28 and 2028/29.
City Hall also spends about £2.8bn a year on major “capital” projects – mostly money it receives from the Government to subsidise affordable housing.
A source said that free school meals would be provided for as long as Sir Sadiq remained mayor.
The source said: “The mayor is committed to delivering free school meals for all state primary school children in London and funding has already been allocated for the next academic year.”
The 2026/27 draft budget says that “up to £10 million per year will need to be found through wider organisational savings” to mitigate the loss of a “parachute payment” that was designed to soften the blow of losing EU funding as a result of Brexit.
GLA chiefs have been forced to draw up “worst case” scenarios because of uncertainty over Government funding – due to Chancellor Rachel Reeves’s Budget not happening until November 26, much later than normal – and the feared loss of £2.5m in council tax and business rates income from next April.
The mayor’s draft budget states: “This all adds up to an unprecedented level of uncertainty at this point in the GLA budget-setting cycle.”
Sir Sadiq wants to find money for a new licensing scheme meant to encourage al fresco dining and make additional investment in the “night-time economy”.
He will also have to spend £4m creating more space at TfL’s Palestra headquarters to accommodate some GLA staff, who are due to be moved out of offices currently shared with the London fire brigade.
He also has to set aside £1.5m to cover potential losses made at West Ham’s London stadium, which has now become the financial responsibility of the GLA.
The draft budgets for the other organisations within the mayor’s empire – the Met police, Transport for London, the London fire brigade, and the London Legacy and Old Oak and Park Royal development corporations – will be published in December.
A spokesperson for the GLA said: “This draft budget focuses on delivering on the issues that matter most to Londoners as we continue to build a fairer, safer and greener London for everyone.
“There's currently significant uncertainty regarding the GLA budget as we await a number of funding decisions from the Government. The budget is therefore very likely to change and will not be confirmed until the new year.
“Given the level of uncertainty, the GLA is taking a cautious approach to this year’s draft budget. The GLA continues to work with the Government to secure the best outcome for the capital ahead of presenting a balanced budget in the new year.”
