Southwark Council is set to increase council tax by 3% for the upcoming financial year, a decision made by the Cabinet during their meeting on February 2, 2026. This rise, which equates to an increase of approximately £1.33 per week for a Band D property, is part of the council's provisional Local Government Finance Settlement for 2026-27.
When factoring in the Mayor of London's proposed 3% increase in the GLA Council Tax precept, the total impact for a Band D property will be approximately £1.61 per week (£1.33 from the borough council plus an additional £14.70 annually from the GLA precept).
The Cabinet considered the Policy and Resources Strategy report, which presented a balanced budget for the 2026-2027 financial year and an update to the Medium-Term Financial Strategy (MTFS). Despite significant pressures, including rising temporary accommodation costs, a balanced budget was presented without further departmental reductions, largely due to savings identified through an organisation-wide transformation programme. The council's three-year MTFS is on track to balance in 2026–27, supported by earmarked reserves, and a new MTFS covering 2027–28 to 2029–30 is being developed.
The report highlighted the impact of the government's Fair Funding Review, which modernised the funding model but provided no new resources, leading to redistribution challenges for councils like Southwark. The provisional Local Government Finance Settlement notes a reduction in grant funding in later years. Specifically, by 2028-29, grant funding will be £20.4m lower than it is in 2025-26. The council's strategy to mitigate this future shortfall involves setting aside earmarked reserves to cushion these impacts and maintain service stability during implementation. £5m of earmarked reserves have been applied to balance the 2026-27 budget, and a further £7.5m of reserves have been allocated to partly offset the deficit in the Collection Fund over the MTFS period.
The provisional settlement noted an increase in Core Spending Power driven by council tax growth, but also a reduction in grant funding in later years. The council's taxbase forecasts are lower than government assumptions, creating a cumulative gap. The discrepancy arises because the government's assessment of growth in new homes within Southwark is greater than the council's own projections, which are based on current development activity and anticipate significant increases in the early part of this decade not being replicated towards the latter end. Furthermore, the government's projections of council tax growth are based on national collection rates, which city and urban councils nationally struggle to achieve.
The Cabinet also noted that the Mayor of London's draft budget proposed a 3% increase in the GLA Council Tax precept. A Council Tax Setting Committee will be convened to formally approve the Council Tax precept.
The chart shows the historical and projected trends of Council Tax against CPI inflation from 2009/10 to 2026/27.
