Kensington and Chelsea Council is bracing for significant funding cuts that will require a more radical approach to savings and transformation, according to a recent report presented to the Overview & Scrutiny Committee. The cuts are a result of the likely implications of the government's recent funding review, which is expected to disproportionately impact inner London boroughs.

The report, presented on Wednesday 17 September 2025, outlined the financial challenges the council faces over the next four years and the measures being taken to address them. The council has already implemented a Savings and Transformation Programme, which has delivered £16.3m in planned savings for the current financial year. However, the expected drop in overall funding means that the budget gap is now significantly greater than previously assumed.

To address the shortfall, officers are developing a range of options for further savings and transformation in the short, medium and longer term. These options will include challenging all areas to find additional savings for 2026/27 and considering all the financial levers at the council's disposal, including potential Council Tax increases, charging a second homes premium, reducing the local Council Tax reduction scheme, and adjusting the employer pension fund contribution. Specifically, the council is considering options such as:

  • Council Tax increases (with potential for a 5% increase without a referendum)
  • Charging a second homes premium (estimated to generate £8m per annum)
  • Reducing the local Council Tax reduction scheme (a 10% reduction would generate about £560,000 of additional income)
  • Adjusting the employer pension fund contribution (assumed to be 7.5% for 2026/27 – 2029/30, which would increase the budget by £7.5m until 2029/30)

The report noted that the council submitted a strong response to the government consultation in August, arguing that the proposed funding changes disproportionately impact inner London. The council's response strongly argues that the proposals disproportionately impact on inner London, and that any proposals that negatively impact on authorities should be phased over a much longer period of time to mitigate the impact.

The Savings and Transformation Programme, initiated in 2024, takes a centralised approach to delivering savings across the council. It aims to ensure greater coordination and alignment, providing corporate infrastructure to develop and track savings, and drive programmes forward.

The programme has already supported the delivery of significant cross-cutting and departmental savings, including those achieved through new cross-council transformation workstreams focused on:

  • Reviewing the council's operational estate
  • Reviewing capital programme commitments and supporting grant spend
  • Developing the council's approach to revenue generation (commercial activity)
  • Workforce review and organisation design and development

According to the Savings and Transformation Programme Update, initial savings proposals across these workstreams total approximately £11m for 2026/27, in addition to £3.2m in savings already included in the existing Medium Term Financial Plan.

The workforce review and organisation design and development includes a voluntary redundancy scheme. The report states, By providing staff with the option to leave voluntarily, the scheme reduces the likelihood of compulsory redundancies, while creating the headroom needed for wider organisational redesign. The outcome will play a key role in enabling the Council to consolidate functions, align resources to priority areas, and deliver the savings required for 2026/27 and beyond.

The Overview and Scrutiny Committee has played a role in shaping the programme's development, with members previously requesting more information about cross-council workstreams and challenging the feasibility of departmental savings targets.

The Minutes of the Meeting of the Overview & Scrutiny Committee held on 15 July 2025 show that the committee has also asked that the links between the council's savings and transformation work and the budget setting and medium-term financial planning be strengthened.

The committee has been asked to consider the report and make recommendations to the Leadership Team, note the main areas of focus for the programme, progress made over the last year and next steps, and identify any suggestions for officers and elected members to consider when developing savings and transformation proposals.