The Corporation’s Finance Chair said its two budgets “must generate material savings if they are to survive”
The City of London’s finance chief has warned of “fundamental uncertainties” as the Square Mile’s governing body set its budget for the year ahead.
Deputy Henry Colthurst, Chair of the Finance Committee, said changes to Government funding had significantly affected the Corporation, adding that transitional relief helping plug the gaps “acts as a temporary bridge, not a long-term solution”.
The Corporation’s budget for 2026/27 was approved at a Court of Common Council meeting on Thursday (March 5), with increases to council tax and the adult social care precept plus social tenants’ rents to kick in from April.
The challenges the Corporation is facing both to its City Fund, which pays for its local authority functions, and its Housing Revenue Account (HRA) in particular have been well documented.
On the HRA, the Corporation was recently granted exceptional financial support from the Government to enable it to carry out essential repairs as it battles to fix up its homes.
The City Fund also faces significant pressures in part due to the outcome of the Government’s Fair Funding Review.
Under the revised needs assessment, which does not take account of the impact of the 680,000 daily commuters coming in and out of the City, the Corporation’s funding is to fall from £77 million to £18m.
While there has been some good news in that transitional funding is now to cover three years rather than one, as was first proposed, the Corporation has warned its services face “uncertainty” under the current model.
According to an officer report outlining the 2026/27 budget: “A substantial funding cliff edge remains from 2029/30 onwards, when transitional support ends, leaving the financial outlook uncertain if the current funding formula continues to underpin allocations beyond this point. Continued lobbying with the Ministry of Housing, Communities and Local Government (MHCLG) will therefore be essential to confirm the indicative allocations and establish a sustainable long-term funding position beyond the current spending period.”
The Corporation is currently projecting a deficit in its City Fund of £13m for 2027/28 rising to £62m from 2029/30 onwards, reflecting the extent of the savings required in the medium-term.
The budget proposed increasing council tax and the adult social care precept by a combined 4.99 per cent, hiking the Business Rates Premium by 1p in the pound, and rents for social tenants by 4.8 per cent.
At Court on Thursday, Deputy Colthurst highlighted some of the pressures on both the City Fund and the City’s Estate, an endowment pot used to support non-local authority duties.
Central to this was the outcome of the Fair Funding Review, which Deputy Colthurst said had substantially affected the Corporation’s finances. He outlined how many of the services the Corporation delivers are for the public at large rather than just its taxpayers.
“We must work closely with Central Government for financial consideration to provide those services,” he said. “No support, no services.”
Deputy Colthurst raised the concerns relating to the HRA, which he described as “precarious” and the model as “bust”.
He also warned against raising council tax and the adult social care precept above 5 per cent, as the Corporation has been given permission to do for 2027/28 and 2028/29.
“I cannot see us imposing an increase less than five per cent next year, but small business in particular is the bedrock of economic growth. Excessive tax rises will drive it away.”
Deputy Colthurst told members: “We are now at a crossroads. Even as I speak major global events continue to increase the fundamental uncertainties that we face. Both budgets (City Fund and the City’s Estate) face major challenges, albeit different ones, but one thing they have in common; they must generate material savings if they are to survive.”
Cllr Stephen Hodgson said he would not be supporting the City Fund budget or that proposed separately for the City’s Estate, over concerns about the impacts of rising taxes on business.
“Whatever financial challenges we face, and they are significant as we’ve heard, our first instinct must be to prioritise savings and efficiencies, not to further burden taxpayers and ratepayers.”
Cllr David Williams struck a different tone, urging members to ensure the priority is to maintain services needed by those who call the Square Mile home, such as housing.
Deputy Colthurst acknowledged the comments made, though noted that while core services must be retained, the Corporation’s resources have been “limited”. Both the City Fund and City’s Estate budgets were overwhelmingly approved.
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