The bill for Wandsworth’s decades-long low-tax party is coming due, and it’s steep: potentially £90 million by 2028/29, with council tax needing to double just to keep the lights on.
The council’s financial situation is revealed in papers published yesterday [pdf] and they use stark language to describe the borough’s position. Officers warn of a “cliff edge” by 2028/29 and note “a rapid deterioration” in finances, with the projected deficit growing by £11.4 million alone since the last review in March. A fiscal crisis is looming.
The maths are brutal: Wandsworth currently charges £507.37 in Band D council tax – which is a quarter of the £2,000 the government now assumes all councils charge. That 75% gap is about to become a huge problem.
Burning through the safety net
Wandsworth started this financial year with a healthy £194 million in reserves. It will end with £166 million – £28 million gone in twelve months.
This isn’t money spent solely on new services. Of that £28 million, £12 million is simply plugging the gap between income and spending. The rest funds temporary programmes: cost of living support, refugee assistance, homelessness services.
The council’s budget documents are blunt about what reserves can actually do: they “buy time but don’t solve structural imbalances.”
At this burn rate, the safety net gets thinner every year. And when the government removes special protection for the Dedicated Schools Budget in March 2028, Wandsworth could be forced to absorb another £30 million deficit from special needs education – potentially wiping out half the remaining reserves in one go.
The gap keeps growing
The projected deficit is worsening fast. In March, the council forecast a budget gap of £39.8 million. This month, new figures show that has jumped to £51.2 million – a 29% increase.
Councillors are unlikely to outline the situation honestly, especially with an election a few months away, so we will: Wandsworth Council risks running out of money in just three years if it doesn’t change course rapidly.
Even the new £51 million deficit understates the problem. Central government’s Fair Funding Review, launching in April 2026, will cut government grants to Wandsworth by an estimated £25-39 million annually by 2028/29. The combined hit to Wandsworth is up to £90 million.
The tax math that doesn’t work
The government assumes Wandsworth will raise council tax by the maximum 4.99% every year. Three years of those increases would generate £11.8 million by 2028/29. That’s a large sum but it would only cover 23% of the local deficit. Or 13% of the combined deficit.
To actually close the £51 million local gap through tax rises alone would require a 68% increase – taking Band D from £507 to around £852 next year.
To close the potential £90 million combined gap would require a 120% increase – more than doubling tax to above £1,100.
And here’s the kicker: even after doubling council tax, Wandsworth would still only be charging half the £2,000 rate the government assumes. To reach that level – which the government intends to treat as normal – would require council tax to nearly quadruple, a 294% increase.
The dangerous political context
There is an even bigger problem though and it’s political: Wandsworth has always prided itself on having the lowest council tax in the country.
The fact that this is only possible because of outdated funding formulas from central government that should have been readjusted decades ago has been glossed over by repeat administrations because of the very powerful low-tax message to voters.
When Labour took control of Wandsworth Council in 2022, it did so on the back of a strong claim that it would not raise people’s taxes. It also believes that if it wants to retain control next year it has to stick to that pledge.
It’s a position that has already led to some ludicrous situations. Most notable was when the council sent a brightly coloured letter to every household claiming their tax has been frozen when everyone was able to see from their council tax bill that it had risen. Even the BBC couldn’t resist that one.
Instead of raising taxes, Wandsworth Council has borrowed money – lots of it – to fund a wide range of new programs. It has also repeatedly raided reserves.
But, as these new financial documents make plain: reserves run out and borrowed money comes with interest payments.
What we should be seeing from the council at its finance meeting next week is an honest appraisal of the situation, a significant adjustment to its spending plans, and a subsequent public warning from the council leader that tax rises are required and will be large.
Political realities however mean that won’t happen, because announcing tax rises in an election year risks losing Labour its majority. Which means the fiscal situation will get worse and honest conversations are unlikely.
Where the money’s going
Three statutory services are eating the budget:
Homelessness: More people presenting, higher costs for temporary accommodation. The documents note this is “particularly acute across London as the combination of the cost of living crisis and supply/demand imbalance in the private rented sector is causing significant concern.”
Adult social care: Numbers up 2.4% last year with increasingly complex needs. “Financial pressure on care service budgets continues in relation to increased demand, more complex care needs and increased costs of care services across all client groups.”
Children’s special needs: Running a £21.2 million deficit, forecast to grow by another £7.5 million this year. When government protection expires in 2028, this lands on the council – potentially claiming £30 million from reserves in one hit.
The budget documents describe these as creating “a persistent and growing funding gap” from “escalating demand and rising costs.”
A crisis nine years in the making
The Fair Funding Review that threatens Wandsworth started in 2016. The government hasn’t updated the funding formula since 2013 – and even then Wandsworth was granted special dispensation because the previous funding formula was itself outdated. For over a decade, warnings were clear this was coming.
Both the Conservative administration before 2022 and the Labour administration since continued promoting the borough as having “the lowest council tax in the country.” The phrase appears repeatedly in the current budget documents. It is still framed as an achievement.
As recently as this year, facing these exact projections, the council froze the main element of council tax. They applied only the 2% social care precept, not the full 4.99% available.
Every year that decision was repeated made the eventual adjustment harder. A steady 2% annual increase from 2016 to 2025 would have raised £67.5 million cumulatively and normalised higher taxes. Instead, both parties chose electoral popularity over fiscal preparation. But financial realities are now catching up.
The untested rescue plan
Facing this crisis, the council is spending £1.9 million from reserves on external consultants to devise a “Transformation Programme.”
Four months of “discovery” to identify savings. Then implementation. The goal: generate enough savings to avoid massive tax rises or service cuts.
The council admits its previous effort – the “Change Programme” of 35 projects – had “limited impact.” This new approach is, of course, going to be different: “organisation-wide transformation” requiring external help because “skills and capacity at the level required are not available in house.”
No specific savings are promised. No guarantee it will work. The budget documents simply state: “The Council needs to work differently and innovate at scale to continue to make a difference to Wandsworth.”
The consultants that will soon be hired to find tens of millions in savings are the only thing between higher taxes, reduced services and potential bankruptcy.
Why government won’t rescue Wandsworth
The Fair Funding Review specifically penalises councils that kept taxes low. From April 2026, grants will be calculated assuming councils charge around £2,000. If you charge less – like Wandsworth’s £507 – tough. You’ll be treated as if you have that income anyway.
The government’s position is clear: “Councils should plan to use available reserves and deliver transformation to help mitigate their losses.”
Wandsworth has £166 million in reserves, which is high for London. It has massive unused taxing capacity (£507 vs £2,000). The government’s view is that if you had the means to prepare, you should have done so. Any transitional protection will assume councils increase tax by the maximum each year.
Wandsworth’s only realistic hope is that central government cuts funds gradually by the same amount that local council tax increase through applying maximum 5% increases. Council officers have already made it clear in meetings that they will be seeking special exemptions again but, so far at least, central government is determined to stick with its rebalancing approach.
What happens next
December’s provisional settlement will confirm how much grant Wandsworth loses. Budget decisions get made in February-March 2026.
The council maintains it will “continue to exercise strong financial management” and “plan to protect front line services.” But it also acknowledges reality: “It is clear the Council will require significant ongoing reductions in spend levels or increases in income to maintain its financial sustainability.”
Residents face some combination of:
- Substantial council tax increases (likely starting 2026/27)
- Service reductions where legally possible
- Transformation savings if consultants find them
- Continued reserve depletion until one of the above closes the gap
The era of having England’s lowest council tax while maintaining high-quality services is ending. Both major parties promoted that model knowing the Fair Funding Review was coming. Now residents will pay for a decade of political choices that prioritised low-tax credentials over fiscal sustainability.
The documents describe a “cliff edge” by 2028/29. That’s three years away. The rapid deterioration in projections suggests it could come sooner.
The party’s over. The question now is who picks up the tab.
The Medium Term Financial Strategy (Paper No. 25-340) is available on Wandsworth Council’s website. The Finance Overview and Scrutiny Committee will review these projections on 9 October 2025.
My understanding – and I may well be wrong because despite 30 years as a Councillor I still find local government finance all but unfathomable – is that the £2000 ‘assumption’ includes the Mayor’s precept (otherwise Wandsworth and other London authorities would be at a serious actuarial disadvantage compared say to other unitary authorities which had a wider range of responsibilities including policing, strategic transport etc.). This still leaves Wandsworth charging about a third of the governmental assumption (since the Mayor charges around £500). But I suspect Wandsworth will be retaining its position with respect to the lowest Council Tax (or at worst within the lowest two) for some time to come. This is because its competitors in this respect are all London authorities, which will be facing many of the same pressures from Government rejigging the formula, and because gap is considerable. With the exception of Westminster, with whom Wandsworth has been cheek by jowl for decades, all the other London Boroughs are quite a way ahead, though still low by national standards. This year at Band D for most of Wandsworth is £981, with Westminster at £1021. But then (excluding the City of London which is anomalous in many respect) there is a substantial leap to Hammersmith & Fulham, H&F, at £1455 and Kensington & Chelsea, K&C, at £1584. To make crazy assumptions, even if the Mayor froze his precept (rather less likely than Michael McIntyre becoming Prime Minister) and H&F did the same (hardly more likely) while Wandsworth increased its proportion by the maximum currently allowed of 4.99% per year, it would still take about 12 years – three whole council terms – for Wandsworth to catch H&F. To be fair Wandsworth has historically been rather more efficient than some of its neighbours – the previous administration pursued a zero debt policy, for example, that saved quite a bit on interest repayments, and Wandsworth was also keener on using the private sector, usually with cost savings, than some more Socialist minded councils in the capital.
My experience of Cabinet, albeit some time ago, is that at this stage in the financial cycle officers and the Cabinet Member for Finance work to produce a truly scary set of projections. Part of the point is to focus the minds of less hardnosed colleagues on the need to make some very difficult financing decisions; in my experience reality is never anywhere near as bad as these projections would suggest, though it can still be pretty challenging. There are undoubtedly troubles ahead but Wandsworth, at present, is in a better position to face the music than many of its neighbours.