Six local authorities in and around London have been granted special permission to increase council tax by more than the standard limit without having to consult their residents in a referendum. The decision follows significant reductions in their central government funding as part of a wider reform of England's local government finance model.
Which Councils Are Affected and Why?
The councils granted this two-year pre-authorisation to exceed the usual 5% council tax increase cap are: Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, the City of London, and Windsor and Maidenhead. These authorities are facing cuts to their funding while simultaneously having some of the lowest council tax rates in the country.
Local government minister Alison McGovern announced the exemption in the House of Commons on Wednesday, 18 December 2025. She argued the change would “improve fairness”, stating that taxpayers in these areas have the lowest bills and paid up to £1,280 less than the average council taxpayer this year.
The Funding Shift and Political Fallout
The move is part of the government's new multi-year funding settlement, which will see English councils receive almost £78 billion for essential services next year. The updated system directs more money towards more deprived areas, with the most deprived 10% of councils receiving a 24% per head boost.
Ms McGovern stated the reforms would reallocate more than £250 million more fairly and stop subsidising bills for around half a million households in the six council areas. She criticised previous Tory policy, saying: “By breaking the link between funding and deprivation, the Tories punished poorer councils.”
However, the Conservative opposition has fiercely criticised the move. They accuse the government of wanting to “punish councils that keep council tax low” and shift funding to “badly-run Labour councils that spend irresponsibly.” Shadow local government secretary Sir James Cleverly warned that affected councils would be forced to cut services or impose big tax hikes, now that the referendum requirement is scrapped.
Substantial Increases May Be Needed
The financial impact on some councils could be severe. Analysis by the Institute for Fiscal Studies (IFS) estimates that to balance their books following the funding reforms, Wandsworth and Westminster councils might need to increase council tax by as much as 75%.
The new funding settlement, which covers the three years up to 2029, promises a 23% increase in core spending power for councils by the end of the period compared to 2024-25. This money funds vital services like waste collection, housing, and children's services. The settlement also includes incentives for local growth, such as allowing councils to keep all additional council tax revenue from new homes.
The final decision on the level of any tax increase now rests with the individual councils, which the minister noted also benefit from “relatively high alternative sources of income.”
