As financial pressure mounts, Havering and Croydon pledge to cap council tax hikes at 5%, despite requesting urgent government support.
Amid severe financial struggles, two London boroughs, Havering and Croydon, have committed to limiting council tax increases to no more than 5% in April, despite the significant budget deficits they face. This pledge comes as several councils, including Newham, apply for special government support to cope with escalating costs, particularly the growing financial burden of housing homeless families.
Havering is grappling with a predicted £74million budget shortfall, largely due to skyrocketing social care costs. In response, the borough has sought emergency government funding and loans to cover the growing debts. Leader Roy Morgon highlighted that the town hall’s Revenue Support Grant from Central Government had plummeted from £70million in 2010 to under £2million today. Morgon expressed that while the borough could request a higher council tax increase, it would not be fair or sustainable. “Why should taxpayers bear the burden of central government cuts? We will continue to push for fairer funding,” he said.
Croydon, which declared bankruptcy three times between 2020 and 2022, continues to struggle with rising service costs and its £1.4billion debt. Executive Mayor Jason Perry stated that while the borough had previously balanced its books with a £38million “capitalisation direction” from the government, it will not suffice this year to cover the budget deficit. However, Perry has also pledged not to exceed the 5% council tax increase cap, despite a staggering 15% rise in 2023. For comparison, the average Band D household in Croydon currently pays £2,366.91 annually.
Lambeth council, facing a £70million deficit in providing statutory services, estimates it will fall £1billion short for social housing funding over the next 30 years. It has warned Chancellor Rachel Reeves of its financial difficulties and applied for “exceptional” government assistance, though it remains unclear whether residents will face higher-than-usual tax increases in exchange.
Newham, one of the boroughs with the lowest council tax rates in London, has applied for exceptional financial support to address its £157million budget gap. The council’s application seeks permission to raise council tax by up to 10%, double the usual 5% limit, as well as approval to sell off assets for day-to-day spending. This gap is largely attributed to the rising cost of providing temporary accommodation for homeless families.
Local authorities across London are struggling with increasing costs, particularly related to social care and temporary accommodation. The capital’s boroughs are collectively spending £4million a day on housing homeless people, with the total monthly bill for temporary accommodation reaching £114million—a dramatic 68% increase from the previous year.
While councils can generally raise council tax by up to 5% annually without triggering a referendum, exceptional circumstances allow them to apply for higher increases. However, the financial pressures across London’s local authorities highlight the growing strain on public services and the escalating costs of housing provision in the capital.