Kensington and Chelsea Council Faces £140M Budget Gap by 2030 Despite Parking Income Boost; Considers Savings and Increased Fees

Kensington and Chelsea Council is facing a significant budget shortfall, projected to reach £140 million by 2030, despite a boost in parking income. The council is exploring alternative revenue streams, including bus shelter advertising and improvements to the Commercial Waste service.

The Environment Select Committee convened on Monday, 24 November 2025, to discuss the Environment and Neighbourhoods Directorate's budget for 2026-2027 as part of its role as the Budget Working Group. The committee reviewed a report outlining the projected budget gap and potential savings and growth proposals. The Public Reports Pack details these proposals.

The report highlighted that the council is currently facing a £41.5 million budget gap, which is expected to escalate to £140 million by 2030. This increase is attributed to several factors, including an anticipated £23.5 million adverse impact from the government's revised funding formula for local government in 2026/27, rising to around £82 million by the end of the period 2026/27-2029/30. Ever-increasing demand for services and inflation, running at nearly double the Bank of England's target of 2%, are also contributing to the financial strain.

The council responded to the government's consultation on the revised funding formula, highlighting that Council Tax was being overstated for Kensington and Chelsea, and Temporary Accommodation understated¹.

To address the budget gap, the council is considering a combination of measures. These include increasing fees and charges by an average of 5%, which is projected to generate £3.3 million. The council is also exploring other revenue streams, such as:

• £400,000 more income generated from bus shelter advertising
• £115,000 from Planning Community Infrastructure Levy (CIL) Charging and improved fee income
• £100,000 from improved performance in the Commercial Waste service
• £44,000 from Parks and Ecology service offer
• £100,000 from Street Enforcement- Concession Contract

A saving of £7.8 million is also being assumed from reduced pension fund contributions, and £350,000 of energy savings following new street lighting investment and reduction in energy prices, are also planned to mitigate the impact of inflation.

Despite the financial challenges, the Environment and Neighbourhoods Directorate reported a £7.955 million underspend in 2024/25, primarily due to increased income in Parking Services. The majority of the parking surplus is retained in the revenue accounts and offset against eligible expenditure. For 2025/26, the Environment and Neighbourhoods portfolio is forecasting an underspend of £5.010m against a revised controllable budget of (£1.597m). This includes a £4.208m overachievement of income in the Parking Service, which is creating a larger than budgeted Parking Surplus that is currently expected to be retained in the revenue accounts and offset against eligible expenditure. This is subject to monthly review, and any surplus that cannot be applied at year-end will be transferred to the Parking Reserve, in line with the legislation, for future use on allowable expenditure.

The report details proposed savings in 2026/27 of £3.199 million for the Environment and Neighbourhoods Directorate. Savings are proposed in the following areas:

• £2 million of increased income from parking
• £400,000 more income generated from bus shelter advertising
• £350,000 of energy savings following new street lighting investment and reduction in energy prices
• £200,000 of cost efficiencies from reformulating the Leisure Services contract