The government has granted six local authorities in England, five of which are in London, special permission to increase council tax by more than the standard five per cent limit for at least the next two years. However, several of the councils have already indicated they have no immediate plans to impose such large rises on their residents.
Which Councils Have Been Granted Flexibility?
The six local authorities that can now bypass the usual referendum requirement for tax hikes above five per cent are: Westminster City Council, Wandsworth Council, Kensington and Chelsea Council, Hammersmith and Fulham Council, the City of London Corporation, and Windsor and Maidenhead Council in Berkshire.
While none have finalised their 2026/27 rates, the move is part of wider changes to council funding aimed at directing more resources to the most deprived areas. Inner London boroughs are expected to lose significant funding under the new 'Fair Funding Review', which is being phased in from 2026, and this tax flexibility is seen as a compensatory measure.
Mixed Responses from Local Leaders
Reaction from the affected councils has been mixed. Westminster City Council's Labour Leader, Cllr Adam Hug, stated the authority was still "digesting" the news and ruled out above-threshold rises "in the immediate future", suggesting the April 2026 tax year would not see a major increase. He emphasised the council's efforts to keep tax "as low as possible".
Hammersmith and Fulham Council was more definitive. Its Labour Leader, Stephen Cowan, said that with residents struggling with the cost of living, the council "will not burden them with extraordinary new tax rises". He pointed to the council's record of maintaining low tax through a policy of 'Ruthless Financial Efficiency'.
In contrast, Kensington and Chelsea Council described the government's move as "a deeply disappointing response". Leader Elizabeth Campbell warned that the council already faces a projected £108 million budget gap over four years and may have to bring 8,000 low-income residents into paying council tax for the first time. The council has not ruled out a large rise.
The City of London Corporation said it would "look carefully at council tax in due course", while Wandsworth Council declined to comment. Windsor and Maidenhead was already considering an above-five per cent rise before the flexibility was granted.
The Impact of the Fair Funding Review
The special permissions come alongside the outcome of the government's Fair Funding Review. The reforms aim to boost funding for the most deprived councils by up to 24 per cent per head. However, the six councils granted tax flexibility are among those facing the largest cuts to their central funding.
Kensington and Chelsea revised its estimated four-year budget shortfall from £82m to £108m after the new formula was released. Hammersmith and Fulham had previously projected a £34m gap in 2027/28 partly due to the plans. The government has since tweaked the formula, including housing costs in deprivation calculations.
Commenting on the wider reforms, Secretary of State for Housing, Communities and Local Government, Steve Reed, said: "This is a chance to turn the page on a decade of cuts... Today we're making sure every community has the funding they need to succeed."
