Wandsworth residents will avoid a tripling of council tax after the government agreed to phase out the borough’s decades-old funding advantage gradually over three years rather than immediately – but annual increases of 5% or more are still coming.
The transitional protections mean Wandsworth can continue benefiting from funding formulas that have given it far more central government money than other areas – formulas that date back decades and which successive councils have used to imply exceptional efficiency rather than historical overfunding.
Throughout this year, council officers warned residents that without special protections, council tax would need to double or even triple to make up for lost central government grants as the Labour government implements its Fair Funding Review 2.0 from April 2026.
But the government’s recent finance policy statement shows councils like Wandsworth will be protected from immediate catastrophic cuts through three-year phasing and income protection floors – essentially allowing the borough to continue benefiting from the old system while gradually adjusting to new reality.
The protection works through two mechanisms: councils move to new funding allocations “in increments of one third” over three years, and most councils including Wandsworth will have their current income protected at 100% of 2025-26 levels (or 95% for a small number of councils furthest above the new assessment).
This means residents face significant annual council tax increases of up to 5% per year – 3% core increase plus 2% adult social care precept – but avoid the immediate doubling or tripling that full implementation of the new funding formula would require.
Over three years, 5% annual increases would result in cumulative rises of approximately 15-16% – taking Band D council tax from around £507 to roughly £587 by 2028-29. Substantial, but far below the £1,100+ that would be needed to close the funding gap immediately.
The truth about Wandsworth’s low council tax
The transitional protections expose what successive Wandsworth councils have obscured: the borough’s famously low council tax has never been primarily about efficiency or good management, but about receiving far more central government money than other areas through funding formulas that should have been updated decades ago.
Wandsworth currently charges around £507 Band D council tax – roughly a quarter of the £2,000 the government assumes councils charge nationally. For years, both Conservative and Labour administrations have promoted this as proof of superior fiscal management.
But the reality is simpler: Wandsworth has been overfunded by central government compared to the rest of the country, allowing it to maintain artificially low council tax while other councils with greater deprivation had to charge residents more to fund basic services.
The Fair Funding Review 2.0 aims to redistribute £47 billion over three years based on updated deprivation data and local tax-raising capacity rather than formulas using data from the 1970s and 1980s. The government’s assessment is that Wandsworth, along with Westminster and a handful of other affluent areas, has benefited disproportionately while deprived areas suffered.
Housing Minister Alison McGovern told Parliament: “Some authorities have benefitted disproportionately from the unfairness of the current system, something which the previous government recognised in consulting on funding reform. However, they did not take action. This government is taking the tough decisions to create a fairer, evidence-based funding system.”
Richmond’s lawsuit withdrawal confirms protections work
The effectiveness of the transitional protections was confirmed when Richmond Council, which faces identical issues to Wandsworth, withdrew plans to sue the government over the funding reforms.
Richmond had sent a legal letter to Housing Secretary Steve Reed last week warning it would seek a judicial review over reforms it claimed could cost the council up to £45 million annually, a 90% funding cut that would have made it the worst-hit authority in England.
But Richmond has now confirmed it is no longer pursuing legal action, with Council Leader Gareth Roberts saying: “I’m pleased that ministers have listened and that the most severe cuts originally proposed will now not be applied – it’s a significant improvement from what was originally on the table.”
Councillor Jim Millard, Richmond’s finance lead, added: “This announcement is a significant improvement on the original proposals and shows the strength of our case to government. But it’s important to be clear: national funding for councils is still falling, and local taxation is playing an ever-larger role in filling the gap.”
Richmond’s decision to drop its lawsuit after seeing the transitional protections confirms they provide enough protection to prevent immediate crisis, which means Wandsworth benefits from the same arrangements.
What Wandsworth warned residents
Throughout this year, Wandsworth Council painted an increasingly dire picture of what would happen without special protections.
In October, officers warned of a fiscal “cliff edge” by 2028/29, with budget documents stating council tax would need to double just to keep services running. The council projected a combined budget gap of up to £90 million when the Fair Funding Review cuts were added to local pressures.
Finance officer Ms Murray told councillors the borough was “burning through reserves” at £28 million per year and that “reserves buy time but don’t solve structural imbalances.”
In July, Murray confessed to the Finance Committee that without special protections, bills could triple. She admitted Wandsworth was still benefiting from “transitional protection” introduced in 2013 – over 12 years ago – and that the council was desperately lobbying for similar treatment under Labour’s reforms.
One councillor warned at that meeting that the council might have to “triple or quadruple council tax” and that even with massive service cuts, there would be “no way around” dramatic tax rises.
The reality: gradual adjustment not immediate crisis
The transitional protections mean Wandsworth’s warnings of immediate catastrophe won’t materialise but significant change is still coming.
The government allows councils to raise council tax by up to 5% annually (3% core plus 2% social care precept) and councils in “significant local financial difficulty” can request additional flexibility beyond this limit.
Wandsworth will almost certainly max out the 5% increases each year, potentially requesting permission for even higher rises. Over three years this means:
- 2026-27: ~5% increase (Band D from £507 to ~£532)
- 2027-28: ~5% increase (Band D from £532 to ~£559)
- 2028-29: ~5% increase (Band D from £559 to ~£587)
By 2028-29, residents would be paying around £587 for Band D: a 16% cumulative increase from current levels. Still well below the £2,000 national average, and far below the £1,100+ that immediate full adjustment would require.
But the direction is clear: Wandsworth’s era as Britain’s lowest council tax borough is ending. The question is whether it ends gradually over a decade, or whether future governments tighten the transition and force faster adjustment.
The political dynamic
The transitional protections create a peculiar political situation for Wandsworth’s Labour administration.
The council faces local elections in May 2026. Throughout the campaign, it will need to explain to residents why council tax is rising significantly every year, but it can truthfully say it has avoided the catastrophic increases that full implementation of the Fair Funding Review would have required.
The council can also argue it successfully lobbied for protections (though every similar council is getting them automatically). What it cannot truthfully claim is that Wandsworth’s low council tax reflects superior management.
What happens next
The government will publish provisional local authority funding allocations this coming month, confirming exactly which councils receive 100% versus 95% income protection and setting out the three-year transition path for each authority.
For Wandsworth residents, the December allocation will show:
- Whether the borough receives 100% or 95% income protection
- Exactly how much government grant funding reduces each year
- How much council tax increases are needed to bridge the gap
- Whether the council requests additional flexibility beyond 5% annual increases
Budget decisions will be made in February-March 2026, with the first of the new-era council tax bills arriving April 2026.
