Council tax could rise by 27% in major UK city under Angela Rayner's plans

Londoners could soon have their council taxes hiked by more than 27% to cover Labour's decision to redirect funding to the north of England, ministers have been warned. Last month Deputy Prime Minister Angela Rayner set out plans for a "progressive" redistribution of local authority funding from central government.

The new formula is set to raise council tax bills in the south to fund the north, according to reports and to ensure that more Whitehall money goes to areas with the greatest needs. As a result the drop in cash will mean wealthier councils, mainly in London and the South East, will have their hand forced to hike council tax or cut public services to make up the shortfall.

Kensington and Chelsea are facing a £30.1 million shortfall in 2028-29. The council said a 1% increase in council tax would raise £1.1 million, meaning it would have to raise taxes by 27.4% to cover the cost without cutting services, according to The Times.

The borough is not understood to be planning to raise council tax by this amount, and government sources insisted there was "no way" local areas would be left with a funding gap of that size.

Westminster, Wandsworth, Richmond, Hammersmith and Fulham, Islington, Camden and the City of London councils are all earmarked as councils who could have their funding hunt and council tax hiked.

Usually local authorities with social care duties can only raise council tax every year by up to 4.99% without a referendum, while others can increase it by up to 2.99%.

However, the Government does give special permission to a handful of authorities every year to increase it further without consulting residents.

Earlier this year Bradford Council was allowed to increase their council tax by 10%, while Newham and Windsor and Maidenhead were allowed a 9% rise.

Elizabeth Campbell, the Conservative leader of Kensington and Chelsea, said the plans were a "drastic redistribution of resources that will hit inner London boroughs hardest" and which "penalises financial management and local choice".

She said: "Every council that benefits is outside the capital. This is not fair funding - it is selective defunding."

A spokesman for London Councils, which represents all the capital's boroughs, said they were "deeply concerned the government's proposals could leave London boroughs in an even worse position."