Hammersmith & Fulham Could Be Hit By Fair Funding Plan
Borough's annual deficit projected to balloon to £34million
Opposition leader says proposed changes would be 'catastrophic' for the borough. Picture: Facebook
September 15, 2025
Hammersmith and Fulham Council is projecting a budget gap of £34million in 2026/27 partly as a result of the Government’s proposed Fair Funding reforms.
The council is one of several expected to be hardest-hit by the Government’s planned changes to local authority funding. Hammersmith and Fulham has so far remained relatively tight-lipped about how it may be impacted by the reforms.
An overview of the council’s finances shared on an internal call and seen by the Local Democracy Reporting Service (LDRS) has however indicated it is anticipating a budget gap of £34m in 2026/27, with ‘Fair Funding Reforms’ noted as a medium term challenge.
It is understood the gap includes provisions for cost inflation and changes to interest rates as well as possible implications from the Fair Funding Review.
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 proposed new system, to be phased in over three years from 2026, is intended to redistribute funding among councils to take greater account of spending needs and their abilities to raise revenue. The changes are not due to be finalised until later this year.
In a recent report, the Institute for Fiscal Studies (IFS) described the reforms as “welcome”, writing how “for arguably 20 years, England has lacked a rational system for allocating funding between councils”.
While some Outer London boroughs are among those expected to benefit, the “biggest losers” according to the IFS would be Inner London local authorities such as Hammersmith and Fulham. The think-tank estimated they would face a real-terms cut of 11-12 per cent over the next three years as a result of the proposals, once inflation is factored in.
Cllr Jose Afonso, Leader of the Conservative Opposition, previously said the changes would be “catastrophic” for the borough and “completely unfair on hardworking taxpayers”.
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.”
A Ministry of Housing, Communities and Local Government (MHCLG) spokesperson previously said the Government is “reforming an outdated system which has left communities behind, ensuring we can better fund councils and improve public services”.
They added, “Our plans represent a fairer system for all councils, while we continue to protect people from excessive council tax rises.”
The leaders of 12 London councils, including Hammersmith and Fulham, published a joint statement raising concerns about the Fair Funding Review and some of its underlying data.
They called for action on three areas: an update to the data underpinning the formulae, such as more weight being given to the cost of housing; lengthening the transition period; and revolving existing sources of revenue or reviewing new areas for boroughs to raise more funds.
Conservative-run Kensington and Chelsea meanwhile has said it is expecting to face an £82m funding gap over the next three years due to the proposed changes, and has hinted at measures including a review of Family Hubs and reducing council tax relief.
The local authority recently ran a voluntary redundancy programme to cut costs, which has had at least 181 applicants.
London Mayor Sir Sadiq Khan has also spoken publicly about the planned reforms, warning cutting allocations to London councils was a “false economy”.
Ben Lynch - Local Democracy Reporter