Hammersmith and Fulham council warns of record 150% council tax rise

Hammersmith and Fulham council has warned it may have to hit residents with a 150 per cent council tax increase, in what would be the largest percentage rise in British history.

The Labour-run west London authority says it has been forced to consider the drastic move after central government cut its funding grant by more than half. Under a report due to be published on Monday, the cabinet warns that the borough is facing its "biggest financial challenge in living memory."

The funding squeeze is the result of the government's "fair funding" review. Introduced last year, the policy aims to redirect cash from wealthier areas with historically low council tax rates to more deprived parts of the country. But local leaders argue the formula is flawed and fails to account for deep pockets of poverty within affluent boroughs, such as the White City estate.

Rowan Ree, the cabinet member for finance and reform, warned that efficiency savings alone will no longer cover the massive funding gap. The council's government grant is set to plummet from £150.5 million in 2025/26 to just £72.4 million over the next four years.

"The scale of the Government funding reduction over the next four years means our efficiency savings alone will not be enough to close this budget gap," Ree said. "As a result, we must look at all our options."

What are the three tax hike options?

The council's upcoming report outlines three potential tax scenarios for the 2027/28 financial year to close the budget gap. These increases apply only to the Hammersmith and Fulham portion of the bill and exclude the Greater London Authority precept, which currently adds £510.51 to a Band D bill:

• A 100 per cent rise: This would increase the local element to £2,018 a year for a Band D property—an extra £19.40 a week—but still leave a £46.1 million budget shortfall.
• A 125 per cent rise: This would take the local element to £2,270.25 a year—an extra £24.25 a week—leaving a £20.6 million shortfall.
• A 150 per cent rise: This would take the local element to £2,522.50 a year—an extra £29.11 a week. This is the only option that would fully balance the council's budget on current assumptions.

Why is the borough hit so hard?

Hammersmith and Fulham has historically kept its council tax rates low, which has made it a prime target for the government's funding reallocation. Under rules introduced by Angela Rayner, the government is forcing councils with low tax rates to bring their bills into line with national averages.

To allow this to happen, the government has given Hammersmith and Fulham, alongside other boroughs like Westminster, Wandsworth, and Kensington and Chelsea, special powers to bypass the usual 5 per cent cap on annual tax increases. However, Hammersmith and Fulham is the only Labour-led authority in London affected by these severe cuts.

Conservative leaders from neighbouring boroughs have also urged a rethink of the funding formula. In a letter to Andy Burnham, leaders from Kensington and Chelsea, Westminster, and Wandsworth warned that the changes would force massive, painful tax hikes on local residents.

The Ministry of Housing, Communities and Local Government defended the funding shifts. A spokesperson said that while local authorities decide their own council tax levels, they "should put taxpayers first." The government added that it has made £78 billion available for council finances next year, with the majority of it unringfenced so local leaders can decide how to spend it.

Hammersmith and Fulham must make its final decision on council tax rates by December. The council is launching a consultation to ask residents for their views on the tax options and potential cuts to services.