FOI - Council Tax setting by the Mayor [Feb 2023]

Your request:

Please provide evidence, including copies of any correspondence, that confirms:

1. Mayor of London, Sadiq Khan was required to increase Council Tax for Transport for London (TfL) as a condition of the government grant three years ago.
2. The government requires the Mayor to increase Council Tax at the maximum allowed (in fiscal year 2024 to 2025) and that if he doesn’t, London would be penalised this year and in subsequent years.
3. The 'maximum allowed' increase in Council Tax is set by the Department for Transport or HM Government at 8.6 per cent, which I understand to be the amount proposed under the Mayor’s current plans.

Our response

Question 1

Please see the TfL Settlement letter from October 2020 which sets out the Extraordinary Funding and Financing Agreement for TfL.

Question 2

The government assumes within its calculations of core spending power (CSP) that authorities apply the maximum allowable council tax increase under the council tax excessiveness principles ‘referendum principles’ (outlined below).

The core spending power assumptions for 2024-25 can be found here.

If authorities choose not to apply the maximum permissible uplift, there is usually no provision to ‘defer’ increases to a later date. Therefore, if council tax is not increased by the maximum amount, this has multi-year consequences, as the base amount on which uplifts would be applied in future is lower than it otherwise would have been had the maximum increase been applied. 

As an example, the police precept was reduced in 2016-17 by £6.76 (Band D) rather than increasing it by the 1.99% uplift assumed in the Home Office police settlement. This has had the effect of reducing MOPAC’s revenues by approximately £35.2m in 2024-25 compared to what they would otherwise have been. The cumulative loss over the last nine years in income is over £300m.

Question 3

The ‘maximum allowed’ increase in council tax is outlined in the government’s council tax excessiveness principles (‘referendum principles’).

Increases in excess of this amount would be possible but the authority proposing this must hold a local referendum and obtain a ‘yes’ vote before implementing the increase.

As outlined on page 9 of the ‘Referendums Relating to Council Tax Increases’ document, the principles for 2024-25 relating to the GLA are as follows:

'For 2024-25, the GLA’s relevant basic amount of council tax is excessive if— (a) the GLA’s unadjusted relevant basic amount of council tax for 2024-25 is more than £24.26 greater than its unadjusted relevant basic amount of council tax for 2023-24, or (b) the GLA’s adjusted relevant basic amount of council tax for 2024-25 is more than £37.26 greater than its adjusted relevant basic amount of council tax for 2023-24.'

In his Final Draft Budget for 2024-25, the Mayor is proposing to increase council tax by the maximum permissible amount before requiring a referendum. For the GLA this equates to an 8.6% increase for council taxpayers of the 32 London boroughs where the increase of £37.26 applies, or 14.6 per cent for council taxpayers in the City of London where the £24.26 applies (due to the City having its own police force and therefore its taxpayers are not subject to the policing element of the GLA’s precept).

If you have any further questions relating to this matter, please contact us, quoting reference MGLA220124-4831.