Westminster City Council faces a projected budget deficit of £161 million by 2030, a stark increase from previous forecasts, due to significant reductions in government funding and rising service demands.

The council's Cabinet met on Monday, July 13, 2026, to discuss the financial outturn for the 2025/26 financial year and to approve the approach for medium-term financial planning. The meeting revealed an £8.2 million overspend in the General Fund revenue for 2025/26, primarily driven by pressures in temporary accommodation and children's social care, which will be funded from the General Fund balance.

Government Funding Cuts and Service Pressures

The council is grappling with substantial reductions in government grant funding. A new funding approach, which prioritises relative need, population data, and local tax-raising capacity, has a material adverse impact on the Council's financial position by giving limited recognition to the costs associated with Westminster's daytime visitor population, high housing costs and complex service demands. Westminster's share of government funding is confirmed to reduce substantially over the next three years. The three-year multi-year settlement from 2026/27 states that grant funding will reduce by £75m by the end of 2028/29, with transitional protection phasing the impact. After the third year of the settlement, this protection is expected to fall out, amounting to an annual reduction of £100m by 2029/30.

This reduction in funding exacerbates the rising demands on council services. The £8.2 million overspend in the General Fund revenue outturn for 2025/26 was primarily due to pressures in temporary accommodation and children's social care. Specifically, the Housing and Commercial Partnerships overspent due to a continued steep increase in demand for temporary accommodation combined with a shortage of supply and higher costs of emergency accommodation. For Children's Services, the overspend was driven primarily by pressures within family services, with Children's Social Care placements accounting for the most significant pressure (£5.5m). This reflects increased complexity of need (£3.3m) and ongoing pressures from prior year disputed costs (£2.2m).

Capital Underspends and Cyber Incident Impact

The Housing Revenue Account also reported an overspend of £2.1 million, to be met from its reserves. In contrast, capital outturns for both the General Fund and HRA showed underspends. The General Fund capital programme underspent by £92.9 million and the HRA by £39.6 million. These underspends are largely due to delays in acquisitions, on-site issues, and the impact of a cyber incident.

Specific reasons for the capital programme delays include Acquisitions not completing , On site issues and delays , and Delays due to the cyber incident. For the HRA Capital Programme, underspends relate mainly to variances across Development and Regeneration budgets. Projects like Ebury Phase 1 saw remaining programme costs, Community Infrastructure Levy (CIL), Sales and Marketing, Rights of Light payments and outstanding internal costs being reprofiled. Church Street Site A experienced milestone payments being adjusted into 2026/27 due to a unconditional date moved back in-year. Carlton Dene had a resequencing of works and a short delay to the construction programme, while Package B Infills cited Outstanding Right of Light payments, remaining S278 works and contingency moving into the next financial year.

The cyber incident, which occurred in November 2025, severely impacted the Council's network and financial systems. This led to Quarter 3 budget monitoring being undertaken on a risk-based basis. The incident also disrupted delivery of the TA strategy, compounding the challenges. The loss of key IT systems for three months delayed property purchase completions and slowed the availability of new, lower-cost temporary accommodation. It hindered the Council's ability to prevent homelessness and secure affordable placements, as case management systems were down, and it slowed the allocation of social housing voids.

A dedicated budget of £1m was established in February 2026 to respond to the cyber incident, funded from the council's corporate risk reserves. A total of £545k was incurred in 2025/26, the majority of which related to staffing, including overtime and specialist supplier costs.

Future Financial Outlook and Engagement

Looking ahead, the council anticipates a challenging financial outlook. The indicative budget gap is projected to be £71 million in 2027/28, escalating to £161 million by 2030/31. This represents an increase of £73 million from the previously reported position.

To address this significant financial challenge, Westminster City Council plans to engage residents and stakeholders on service priorities and potential council tax increases. The budget process will include a comprehensive engagement campaign, with the main elements and activity taking place in July to September with the findings to be published in October, before the Budget Scrutiny sessions in November. The campaign will utilise Digital channels such as a campaign hub and online channels including newsletters, email, paid social, organic content, short explainers and video, alongside Traditional and community channels like printed magazine Your Westminster, posters, leaflets, and events in libraries, housing offices, community centres to ensure all communities and stakeholders have a voice.

The council anticipates a need for both service reductions and a significant increase in council tax to balance the budget. An example provided suggests that if Westminster were to raise its element of council tax by 100%, this would equate to an additional £537 per year per household. The total Band D council tax would then be around £1,610 a year, an overall increase of 54%, generating an additional £83m for the council.

Councillor Paul Fisher, Cabinet Member for Value for Money and Finance, noted the challenging financial landscape. The council's transformation programme, Fit for the Future, aims to deliver a minimum of £30 million in recurring savings by the end of 2028/29.

The Cabinet approved the revised medium-term financial planning forecast to 2030/31 and endorsed the budget process approach, marking the initial stage of the annual business planning cycle. The council is required by law to set a balanced budget.

Decisions 13th-Jul-2026 18.30 Cabinet Public reports pack 13th-Jul-2026 18.30 Cabinet