A central London authority could double its council tax to prevent cuts to services following a government decision to redirect funding towards more deprived areas.
Westminster City Council has warned it faces “stark and very tough choices” as a result of changes made under the “fair funding” review of council allocations.
This review is set to halve its annual central grant, plummeting from £219 million to £119 million by the 2029-30 financial year.
The Conservative-run council, which collects more than £2.5 billion in business rates, argues the Government’s calculations overlooked high rates of poverty and social challenges within the borough.
It also contends the review failed to account for the significant pressures placed on services by its one million daily visitors.
Westminster, along with five other councils, has been granted two-year “funding realignment powers”, enabling it to increase council tax beyond the standard 5% threshold.
This effectively signals that the Government expects the authority to hike council tax significantly to make up for lost funding, Westminster said.
The council, which has one of the lowest average council tax levels in the country, will consult residents this summer on what services they value most and their willingness to pay higher bills.
Cabinet member Paul Fisher said: “The Government assumes we are now going to put up council tax by 75–100% to make up our immediate budget shortfall.
“Whilst we have not yet settled on council tax levels for next year, this new financial climate is unprecedented and presents us with stark and very tough choices ahead where there are no easy options.”
He added that “extensive efficiencies and transformation plans” would not cover the budget shortfall in the coming years, so residents will be asked if they are prepared to pay more council tax.
Mr Fisher added: “Whilst we will continue to fight for Westminster residents and take our case to the Government, we need to be honest that there is no easy option here and no horizon in which we do not have to make savings.
“We charge the second lowest council tax in the country, provide cost efficient services and collect more than £2.5 billion in business rates – yet we are effectively being forced into making huge savings, with likely cuts and expected council tax increases.
“Even if we doubled our council tax, we would still be one of the lowest in London and the country.”
A Labour source said: “The fair funding formula is about directing money to the areas in Britain’s most deprived communities around the entire country.
“I don’t think even Westminster council would think that they are top of that particular list.”
The Local Government Association said that despite the funding reforms, councils in England are facing a £7 billion funding black hole within three years, a gap which is more than the current council spend on roads, transport, homelessness and housing services combined.
Band D properties in Westminster are currently charged £1,047 a year in council tax.
The four other councils granted funding realignment powers are City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth and Windsor & Maidenhead.
A total of seven other councils have been permitted to increase council tax to a specific level.
