Three Conservative-run London boroughs are preparing to challenge the Government's new local government funding settlement using a rarely deployed statutory power, after their leaders met Conservative frontbenchers in Westminster on Wednesday 26 August.
Wandsworth, Westminster City Council and the Royal Borough of Kensington and Chelsea are the boroughs worst affected by the Fair Funding Review 2.0, implemented through the multi-year finance settlement covering 2026/27 to 2028/29. According to PoliticsHome, which first reported the meeting, the leaders agreed with shadow housing, communities and local government secretary Sir James Cleverly and Conservative party chairman Kevin Hollinrake to pursue action under the Sustainable Communities Act 2007, with Wandsworth consulting residents before submitting a formal proposal asking ministers to reconsider the reforms. The Evening Standard reported the same meeting and mechanism the same day, describing it as a "legal process" and saying a public consultation and official announcement was expected as soon as Friday 28 August.
The Act allows councils to submit proposals to central government seeking the removal of legislative or other barriers to improving the sustainability of their area. Under the framework in force since December 2010, proposals go direct to government rather than through a "selector" body; ministers must consider them and, if they decline to implement a proposal, explain why. It does not create a right of appeal against a finance settlement, and no court proceedings have been issued. Neither Westminster nor Kensington and Chelsea has published a decision to submit a proposal, and the consultation trailed for late August has not been launched.
What is at stake for the three boroughs is set out in the settlement itself. The provisional settlement, announced on 17 December 2025, named six authorities — the City of London, Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, Westminster, and Windsor and Maidenhead — as having "the lowest council tax levels of any upper tier authorities in England". For those six, the Government will not set council tax referendum principles in 2027-28 or 2028-29, removing the 5 per cent cap above which a local referendum is normally required, and has built an assumed council tax increase into their core spending power.
The three leaders — Westminster's Paul Swaddle, Wandsworth's Robert Morritt and Kensington and Chelsea's Elizabeth Campbell — wrote to Prime Minister Andy Burnham last month arguing that the funding formula "punishes low tax councils". In the letter, reported by PA Media, they said:
"If our councils do not impose council tax rises, our communities face considerable cuts in funding for local services. "This is fiddled funding, cooked up in Whitehall but leaving town halls to carry the blame."
A government spokesperson told PA: "For too long, some of the wealthiest parts of the country have benefited from exceptionally high levels of government support while communities facing greater pressures lost out. "Our reforms will make the system fairer for taxpayers across the country, while protecting councils through the transition and ensuring no area faces a cliff edge."
Each council has published its own estimate of the loss. Westminster said on 3 July that its government grant would fall from £219m in 2025/26 to £119m in 2026/27, a reduction of £100m, with grant funding down by 46 per cent over four years. Kensington and Chelsea, which approved a 4.99 per cent council tax rise and more than £21m of savings in February, puts its loss at £108m over four years. Wandsworth launched a spending review in July citing a projected 40 per cent reduction in government funding and reserves forecast to run out within three years without action.
PoliticsHome reported on 17 August that Wandsworth was preparing a council tax rise of as much as 160 per cent from April 2027, sourced to internal discussions. The figure applies to the council's own share of the bill, roughly half the total for Wandsworth residents, with the remainder going to the Mayor of London. It appears in no published council document; the Wandsworth Conservatives' own website states that council tax "will need to increase by 130 per cent after the election" even if the savings programme delivers in full. The party has said its spending review will be completed in September.
The mechanism behind the losses is documented in Wandsworth's own budget report, which notes that the six boroughs all have low council tax and currently receive grant funding more than 15 per cent above their assessed need under the new formulae. The needs assessment takes account of each authority's capacity to raise council tax, according to the House of Commons Library. The final settlement, published on 9 February and approved by the Commons on 11 February, distributes £83.5bn to local authorities in 2026/27 rising to £90.5bn in 2028/29, and added a one-off adjustment support grant for 2026-27 for authorities that would otherwise have seen core spending power fall against indicative allocations.
Kensington and Chelsea's leader, Cllr Elizabeth Campbell, said in February: "The Government's so-called Fair Funding Review is anything but fair and expects councils like ours to do more with less money as we face £108 million cuts in funding over four years."
Westminster City Council said in a statement in late July: "We will keep fighting for Westminster residents and pressuring the government, but the reality is there is no scenario in which we do not have to make savings. More than 200,000 residents live in Westminster, but 800,000 people enter our City every day. Westminster also provides over £2.5 billion to the national government in business rates. None of these unique features to the City are recognised in these cuts."
Wandsworth Labour, which ran the council until May, disputes the Conservative account of the borough's finances, saying it has "zero external debt and the highest reserves of any neighbouring borough". A spokesperson told the Evening Standard: "They need to sit down with a spreadsheet and get on with the job instead of playing politics and misleading local residents."
Wandsworth's Conservative administration holds 29 of 58 seats and governs through a confidence and supply agreement with an Independent councillor, a position unchanged by Labour's victory in the Trinity ward by-election on 27 August, according to the council.
Hammersmith and Fulham, which is Labour-run, the City of London and Windsor and Maidenhead are subject to the same removal of referendum principles but are not party to the challenge. Any proposal under the 2007 Act would go to the Ministry of Housing, Communities and Local Government, headed by Angela Rayner since the Prime Minister's reshuffle in July.
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