The Labour-led council says council tax will remain lower than in neighbouring boroughs despite the expected hike
Merton residents are set to pay more in council tax next year, as the Labour-led authority proposes a 4 per cent increase for 2026/27. The council has cited the government’s recent funding review as a key factor in the decision, but insists residents will still pay less than those in neighbouring boroughs.
The proposed rise, announced as part of its budget for the next financial year, comprises a 2 per cent increase for core services and a 2 per cent precept ring-fenced for adult social care spending. For a typical Band D property, bills would rise from £1,598.05 to an estimated £1,661.97 — an increase of around £64 per year.
The government’s recent “Fair Funding Review”, due to take effect in April, will overhaul the formula used to allocate funding to local authorities. It categorises Merton as a “low-needs, high-resourced authority”.
Under the government’s current ‘Core Spending Power’ model, Merton is assumed to raise council tax by 5 per cent annually for the next three years — the maximum allowed without a referendum. That model suggests residents should be paying £2,060 in 2026/27, significantly higher than the borough’s current rate.
By opting instead for a 4 per cent increase from April, the council is effectively budgeting with less spending power than the government assumes. As a result, it will receive less grant funding because the formula presumes higher local tax income than is actually collected.
The long-term impact is also significant. Merton’s funding gap — the difference between spending needs and available funding — is now forecast to be £5.78 million higher than originally estimated by 2029/30.
Combined with a projected 0.75 per cent growth in housing numbers, the increase is expected to generate £134.2 million for local services. Although lower than last year’s proposed 4.99 per cent rise, the Labour administration has claimed they have “frozen” the main element of council tax. They also noted that the borough’s rates remain comparatively low.
Council Leader Ross Garrod said: “We promised to keep your bills as low as we can to help your family with the cost of living, and we have. Freezing the main element of council tax is a choice we have made as a Labour Council, on the side of hard working families in Merton.”
Cuts and efficiency savings
The 2026/27 budget also includes more than £7.2 million in cuts and efficiency savings. Adult Social Care accounts for £2 million of the cuts, including £435,000 saved from reviewing Section 117 aftercare packages — free support provided when someone leaves hospital after treatment for a mental disorder — and £500,000 from the planned use of predictive AI to manage demand and reduce hospital admissions.
Children’s Services will save £533,000 by reshaping social care teams and £97,000 by reorganising the Virtual School – support provided to children with barriers to education – alongside reductions to youth participation and engagement funding.
Administrative changes include a 35 per cent cut to the in-house Design Studio salary budget, fewer agency staff in Building Control, and the merger of the Complaints and Information Governance teams.
The Liberal Democrat opposition has labelled the cuts “panicked” and “shameful”, claiming some were brought forward at the “last minute”.
Cllr Anthony Fairclough told the Local Democracy Reporting Service: “Labour claim they are doing all they can to support residents with the high cost of living. Yet behind the scenes they are introducing inflation-busting increases to council services and attempting to pass the cost of young people’s health services onto the NHS.
“They are desperate to cover up the impact of massive cuts the government is forcing on them. The Liberal Democrats will continue to push for transparency and integrity in this budget whilst working to make Merton fairer and more affordable.”
Merton’s final budget proposals will be decided at the Full Council meeting on February 25.
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