The Performance and Finance Scrutiny Sub-Committee met to discuss the draft revenue budget for 2026-27 and the draft Medium-Term Financial Strategy (MTFS) to 2028-29, following the announcement of provisional three-year funding allocations. The meeting noted that the budget gap for Harrow had been revised downwards significantly due to these allocations.

Draft Revenue Budget and Medium-Term Financial Strategy

The committee received an update on the provisional three-year funding allocations for 2026-2027 to 2028-2029, which were announced on 17 December 2025. These allocations indicated a national increase in total funding to local government of £11.5 billion over three years, with London boroughs receiving an increase of £1.8 billion.

As a result of these provisional allocations, Harrow's projected budget gap across the three years has been revised from £32.539 million to £11.093 million. This breaks down as follows:

• 2026/27: The gap has reduced from £17.061 million to £9.634 million.
• 2027/28: The gap has reduced from £8.153 million to £2.141 million.
• 2028/29: The gap has reduced from £7.325 million to a surplus of -£682,000.

The final financial settlement is expected in late January or early February 2026, with the final budget to be presented to Cabinet on 19 February 2026 and Full Council for approval on 26 February 2026.

During the discussion, members noted that the total funding for London boroughs assumed an annual council tax increase of 4.99%. It was clarified that six authorities in London – Windsor and Maidenhead, Westminster, Wandsworth, Hammersmith and Fulham, the City of London, and Kensington and Chelsea – have had their council tax referendum limits removed, allowing them to increase council tax by more than 4.99%. A point was raised that the government assumes 100% council tax collection, whereas Harrow's collection rate is 98%.

Members acknowledged the improved funding position but expressed concern that a shortfall still remains. They questioned whether the £11 million gap would increase further. They were advised that the budget had been set for a three-year period and significant changes were not envisaged.

The committee also discussed the potential impact of increased housing development on council tax receipts, noting that the current budget had not factored in additional households contributing to council tax and that this would require further analysis.

Concerns were raised about the financial pressures in areas such as temporary accommodation, children's services, and adult social care, and their long-term structural impact on council finances. Members questioned whether the government would eventually fund these services, and were advised that while this was a possibility, the responsibility currently lies with local authorities.

The committee noted the update on the provisional financial settlement and the revised draft revenue budget and MTFS.