Decision

DECISION;

1. Considered the feedback and recommendations from the Overview & Scrutiny Committee (OSC) meeting held on the 12 of January 2025 (Appendix 13).
2. Agreed to propose a General Fund Revenue Funding Requirement of £487.758m for 2026– 27, incorporating the Council’s budget assumptions, planned budget reductions, growth and inflation allocations which includes transformation proposals, revenue contingency and transfers to reserves as set out in paragraph 3.13. This is subject to any further changes arising from the Final Local Government Finance Settlement or other necessary adjustments.
3. Approved the proposal to levy a 2% Adult Social Care precept and an increase of 2.99% on the general Council Tax element for 2026-27.
4. Noted the Council continues to shield those most in need from the burden of increased council tax by continuing the Council Tax Support Relief Fund.
5. Noted the increase in the in-year Revenue Contingency by £5m and the proposed increase to the Risk Reserve of £20m in 2026-27, together with the planned total increases of £15m to the contingency and £50m to the Risch Reserve over the three-year MTFS period.
6. Noted that the Local Council Tax Reduction Scheme will remain unchanged for 2026-27.
7. Approved the Council Taxbase calculations in Appendix 4.
8. Noted that previously approved Mayoral Priority Investments of £50m per annum, which continue to be reflected in the Base Budget, as set out in Appendix 2D.
9. Approved that the Corporate Director Resources (Section 151 Officer), in consultation with the mayor and Cabinet Member for Resources & Cost of Living, be authorised to make any changes required to the draft budget following receipt of the Final Local Government Finance Settlement (LGFS) and any other relevant material information.
10. Noted the latest position of the Council’s reserves in Appendix 8.
11. Approved the HRA housing rent and service charge increases as outlined in section 5. This includes increasing housing rents for properties by 4.8% for 2026- 27 (CPI +1%), service charges by 3.8% (CPI) and new build properties at Formula rent +5% in the first year only. The Council will also be introducing a HRA Hardship Fund to protect the most vulnerable households from these increases.
12. Approved the convergence to formula rent, if confirmed by Government, at the rate permitted.
13. Approved the introduction of a HRA hardship fund (£400k per annum), to be paid for from the additional income generated from the rental increase (recommendation 9) to assist tenants who are negatively impacted by the rent increase subject to meeting specific conditions.
14. Noted an additional £100m in capital investment in existing housing stock over the next 5 years.
15. Approved the proposed the Housing Revenue Account (HRA) budget as set out in Appendix 10A.
16. Approved the HRA Rent Setting Policy at Appendix 10B.
17. Agreed that the National Schools Funding Formula (NSFF) adopted by Tower Hamlets originally in 2019-20 continues for 2026-27. The only changes included are increases to the factor values in line with the NSFF.
18. Agreed that the Minimum Funding Guarantee (the mechanism that guarantees schools a minimum uplift in per-pupil funding) is set as close to 0.5% as affordable, the maximum allowed after consideration for growth and factor changes in School allocations.
19. Noted the School funding position set out at section 4, in particular the overall Dedicated Schools Grant (DSG) deficit.
20. Noted the Equalities Implications as set out in section 10.
21. Approved the proposed discretionary and statutory fees and charges as detailed in Appendix 5.
22. Approved the continued delegation for amendments to fees and charges, including those to take account of the result of any Equality Impact Assessment that may be identified, to the relevant Corporate Director following consultation with the Lead Member and the Mayor, and that they will be reviewed throughout the year as part of the budget monitoring process.
23. Agreed that all increases and new fees are implemented from 1st April 2026 where possible or as soon as practical thereafter.
24. Noted the General Fund (GF) Capital Programme budget from 2025-26 to 2028-29 plus future years as set out in Appendix 9B, totalling £207.482m. This includes revising the 2025-26 budget to £59.305m.
25. Noted the Housing Revenue Account (HRA) Capital Programme budget from 2025- 26 to 2028-29 plus future years as set out in Appendix 9D, totalling £997.345m. This includes revising the 2025-26 budget to £185.290m.
26. Noted the budget allocation growth and reductions to schemes in the General Fund (GF) capital programme as detailed in Appendix 9C, subject to sign off through the Council’s capital governance process.
27. Approved delegated authority to the Corporate Director of Housing and Regeneration in consultation with the Corporate Director of Resources to take any steps required to deliver the capital programme including but not limited to going out to tender, appointing consultants and contractors in accordance with the Procurement Procedures, acquiring land interests and appropriating land and assets from the General Fund (GF) to the Housing Revenue Account (HRA), subject to approved budgets and in consultation with the Mayor and the Cabinet Member.
28. Note that all capital projects within the capital programme will only proceed once all due diligence relating to the Council’s capital governance process has been completed.
29. Noted the capital financial commitments of both the General Fund (GF) and Housing Revenue Account (HRA) extend beyond the MTFS period (2025-29). By approving funds for the current period, commitments to the funding of future years is required. For the General fund (GF) the future years commitment is £3.333m and for the Housing Revenue Account (HRA) the future years commitment is £79.326m.
30. Noted the strengthened governance arrangements supporting effective financial management and controls throughout 2025–26, which will continue to be embedded across the organisation.
31. Noted that the funding allocated in the MTFS to address the Council’s Transformation agenda and the nature of the statute of recommendations presented by the Council’s auditor, that they be fast-tracked, empowering the Strategic Director of Change and Improvement in consultation with the Executive Mayor and the Chief Executive, to prioritise measures to address those areas in a timely fashion.

Reasons for the decision

The Council has a statutory duty to set a balanced and sustainable budget and to set the Council Tax Levels for the financial year 2026-27 by 11 March 2026 at the latest. Section 25(1) of the Local Government Act 2003 (“the 2003 Act”) requires the Chief Financial Officer (CFO) to report to Full Council on:

•         The robustness of estimates made for the purposes of budget calculations.

•         The adequacy of the proposed financial reserves.

This year’s budget-setting process has been exceptionally extensive. A comprehensive line-by-line review of all expenditure areas was undertaken, supported by Spending Review Panels and deep-dive sessions involving elected Member portfolio holders throughout the summer and autumn. This process not only delivered the required growth and savings but also corrected historical misalignments in critical areas such as Housing Options and Adult Social Care. To strengthen governance and transparency, all budget holders received budget monitoring training, and three modular workshops (General Fund, HRA and Capital) were delivered to elected Members, alongside dedicated sessions for Scrutiny Members.

The Council has successfully rolled out real-time financial reporting, enabling strong oversight of expenditure and simplifying forecasting. These measures, combined with a £25m General Fund Reserve and increased contingency provisions, reflect CIPFA guidance and ensure resilience against in-year pressures. While projections are reasonable and based on current available information, they remain subject to key assumptions, and risks relating to inflation, demand volatility, and fluctuations in the property market continue to present uncertainty.

The MTFS sets out a balanced and sustainable financial plan for 2026-27 to 2028-29, underpinned by reasonable assumptions and scenario modelling. It incorporates the implications of the Government’s Fair Funding Review 2.0 and the indicative multi?year Local Government Finance Settlement, both of which are critical for providing the planning certainty required over the medium term. Despite the settlement, Tower Hamlets faces unique pressures as an inner London borough with high deprivation, rapid population growth, and acute housing challenges. Our strategy responds to these realities by combining prudent financial management with bold investment in transformation and community resilience.

Alternative Options

Whilst the Council will adopt a number of approaches to the identification of measures aimed at delivering its MTFS, it must set a legal and balanced budget and maintain adequate reserves for the coming financial year. The Mayor can propose the Council’s priorities, in terms of the services it delivers and the level of investment, for agreement by the Council.

Additionally, the Council has a statutory duty to set a balanced HRA. Whilst there may be other ways of delivering a balanced HRA, the budget setting process outlined in this report is considered the most effective, in realising all the Council’s statutory duties having regard to the matters set out in the report.

Action by:

CORPORATE DIRECTOR FOR RESOURCES (A. KASSIM)