Kensington and Chelsea Council is facing a budget shortfall of £118 million over the next four years, primarily due to proposed changes in local authority funding. The financial strain comes amid ongoing efforts to improve services for residents.
The government launched a consultation on the proposed approach to local authority funding reform from 2026/27. Initial estimates suggest the changes proposed would reduce the council's funding by £82.7m over the period 2026/27-2028/29.
The council's Leadership Team met on Wednesday, 9 July 2025, to review the Medium-Term Financial Strategy (MTFS) for 2026/27 to 2029/30, which outlines the financial challenges and strategic plans for the coming years. The MTFS was recommended to Council for approval.
According to the report pack for the Leadership Team meeting, the government's consultation on local authority funding reform, set to begin in 2026/27, is expected to significantly impact the council's financial stability. Initial estimates suggest a potential reduction of £82.7 million in funding over three years, from 2026/27 to 2028/29. This reduction is phased, with £23.7 million less in 2026/27, £29 million in 2027/28, and £30.1 million in 2028/29.
This projected funding reduction, combined with other financial pressures, has led to an estimated budget gap of £41 million in 2026/27, escalating to £118 million over the subsequent four years. The council plans to respond to the consultation to strongly argue that the proposals disproportionately impact inner London, and that any proposals that negatively impact on authorities should be phased over a much longer period of time. The council will be advocating for a more equitable approach to funding distribution and a longer phasing period for any adverse changes.
To address this budget gap, the council is developing a Transformation and Savings Programme, aiming to modernise practices and identify new revenue streams. The Leadership Team is scheduled to receive a comprehensive update on this programme in September.
The council faces significant financial challenges in the coming years, requiring strategic planning and innovative solutions to maintain essential services and address the needs of its residents. The Leadership Team is committed to navigating these challenges and ensuring a sustainable future for Kensington and Chelsea.
