Hammersmith and Fulham (Parliament Politics Magazine) – Hammersmith and Fulham Council warns of a £34m budget gap by 2026/27, citing pressures from the Government’s proposed Fair Funding reforms.
The government’s proposed reforms to local authority funding are projected to have the greatest impact on a number of councils, including West London. To now, Hammersmith and Fulham have not spoken out much about how the reforms would affect them.
However, according to a financial analysis of the council given on an internal call and viewed by the Local Democracy Reporting Service (LDRS), it is projecting a £34 million budget deficit in 2026–2027, with “Fair Funding Reforms” identified as a medium-term challenge.
It is recognized that the gap covers potential ramifications from the Fair Funding Review as well as adjustments for interest rate changes and cost inflation.
A Hammersmith and Fulham Council spokesperson said that, like all local authorities, it has made some “preliminary budget estimates” for next year as it awaits the outcome of inputs such as the review, adding:
“All our budget proposals for 2026/27 will be reported as usual to Full Council in February 2026.”
The goal of the proposed new system, which would be implemented gradually over three years starting in 2026, is to reallocate funds across municipalities in a way that better considers their capacity to generate income and their expenditure requirements.
“For arguably 20 years, England has lacked a rational system for allocating funding between councils,”
the Institute for Fiscal Studies (IFS) wrote in a recent paper, calling the improvements “welcome.”
Inner London local authorities like Hammersmith and Fulham will be the “biggest losers” according to the IFS, even though certain Outer London municipalities are among those anticipated to gain. According to the think-tank, the plans would result in a real-terms drop of 11–12% over the following three years.
He told the LDRS:
“That’s why as an opposition we have responded to the Government consultation making a clear case as to why they need to rethink aspects of this change, and reduce the negative impact on Hammersmith and Fulham.”
Cllr Rowan Ree, Cabinet Member for Finance and Reform, responded by highlighting the council’s effective management of its finances demonstrated by the likes of its low tax rate and free homecare. He said:
“The last time the Conservatives were custodians of the borough’s finances they slashed services, increased charges and made shocking commitments to property speculators which would have bankrupted our finances.
They believe that cutting vital services or putting up residents’ charges is the only way forward. The biggest risk to the borough’s finances is the unreformed thinking of the Conservative opposition.”
The internal communication the LDRS has seen does not reveal much more than the projected £34m budget gap for the next financial year, alongside the mention of the ‘Fair Funding Reforms’.
Cllr Afonso said:
“When the IFS report clearly stated that the Fairer Funding settlement would lead to council tax rises, the Labour Cabinet member for Finance described this as utter tosh. We now know that LBHF are projecting a budget gap of £34m for 2026/27. There are two ways to fix such a gap: council tax rises or budget cuts. We know which one Labour will go for.
So when he made these statements two weeks ago, did he simply not know the detail – or was he hoping this would go away?”
Cllr Ree said:
“Our funding was reduced by 54 per cent over 14 years of the last Conservative government. Despite this, Hammersmith and Fulham’s Labour administration has delivered the third lowest council tax in the country and has cut £138m in waste inherited from Conservative councillors.
We did this through our Ruthless Financial Efficiency programme, which has allowed us to deliver services you can’t get anywhere else; such as free homecare to those who need it and our 72-strong Law Enforcement Team to keep residents safe.
When the local Conservatives were in power, their mismanagement of the borough’s finances cost our residents dearly. They made shocking commitments to property speculators which would have bankrupted Hammersmith and Fulham, slashed services, and increased charges.
Local Conservative councillors are clearly no different from their ideologically driven national party, who crashed the economy and behaved so recklessly in office. They would, once again, put our prudent management of Hammersmith and Fulham’s finances at risk. Local residents cannot afford the cost of a Conservative council.”
A Hammersmith and Fulham Council spokesperson said:
“We have a clear ruthlessly financially efficient approach that will continue to deliver for our residents. A recent independent Finance Peer Review carried out by cross-party councillors and officials from other English councils, and reports from our external auditors recognised Hammersmith and Fulham as a ‘financially well-run’ local authority.
Like all other councils in the country, we have made some preliminary budget estimates for next year as we all await the outcome of the Government’s Fair Funding Review, the Chancellor’s Budget and Local Government Finance Settlement at the end of the year before finalising our budgets.”
In a joint statement, the leaders of 12 London councils including Hammersmith and Fulham voiced their reservations with the Fair Funding Review and some of the evidence that supported it.
They demanded action in three areas: updating the data that supports the formulas, giving the cost of housing more weight; extending the transition period; and rotating current revenue streams or looking at new ones to help boroughs raise more money.
In the meantime, the Conservative-run Kensington and Chelsea has alluded to measures like a review of Family Hubs and a reduction in council tax relief, stating that it anticipates an £82 million financial deficit over the next three years as a result of the proposed changes.
At least 181 people applied for the voluntary redundancy program that the local government recently implemented in an effort to save money.
In a public statement, London Mayor Sir Sadiq Khan warned that reducing funding for London councils was a “false economy” in reference to the proposed reforms.
What strategies is Hammersmith and Fulham using to address the budget gap?
The council has a strong history of achieving cost efficiencies, including improved arrangements for contract management and savings from procurement. It conducts regular reviews of significant contracts, such as those related to adult social care, in order to renegotiate and reduce expenditure.
The use of “large data” analytics enables the prediction of service demand at an earlier stage so that demand can be addressed in a timelier, more efficient manner, thereby managing resources better, and reducing costs. Investing in assistive technology for social care in order to improve outcomes and reduce costs over the longer term.
The council is planning towards a range of green investment initiatives that seek to draw together investment, which in turn, will bolster the financing of climate action, and provide a return on investment.