The Budget and Performance Committee met to discuss the 2026-27 Greater London Authority Group Budget, with a particular focus on the provisional local government finance settlement and its impact on the GLA Group. Key discussions included the positive financial settlement received, uncertainties surrounding business rates, the Mayor's manifesto priorities, and the budget processes for the upcoming year.

The 2026-27 Greater London Authority Group Budget

The committee received an update on the 2026-27 Greater London Authority (GLA) Group Budget, noting that the provisional local government finance settlement announced in December was more favourable than anticipated. Faye Hammond, Chief Finance Officer at the GLA, explained that the settlement provided an additional £155 million compared to the draft budget control total, which, after accounting for National Insurance contributions, amounted to an increase of £138.8 million. However, she cautioned that this increase would diminish over time, with transitional arrangements reducing it by the third year. Hammond also highlighted ongoing uncertainties, including the lack of NDR1 returns and risks around business rate levels, as well as the police settlement, which was £112 million more favourable than originally projected, though clarity was still needed on whether National Insurance contributions were included.

Elliot Ball, Interim Director of Group Finance and Performance at the GLA, elaborated on the business rates situation, explaining that while the previous system had allowed the GLA Group to accumulate significant retained business rates growth, a portion of this (£280 million) would be retained as part of the baseline, with the remainder phased out over three years. He also expressed caution regarding the upcoming NDR1 returns, citing the complexity of the business rate system changes and the potential for businesses to challenge revaluations, which could impact actual revenue.

Assemblymember Krupesh Hirani questioned the impact of the settlement on the Mayor's ability to deliver manifesto priorities, such as the 40,000 council homes and ending rough sleeping. Hammond confirmed that the rough sleeping grant would continue at the same level.

The committee also discussed the budget process for the year, with Ball identifying uncertainty in funding and the macroeconomic environment as key challenges. Hammond noted a change in process this year, with more direct conversations with government and a focus on potential savings.

Free School Meals Funding

A significant portion of the discussion revolved around the government's announcement to extend free school meals funding to all pupils on Universal Credit from September 2026. Faye Hammond explained that schools would receive funding directly from the government, reducing the amount claimed from the GLA. This change is expected to save the GLA approximately £50-£60 million annually, which had previously been drawn from reserves. While this would protect or grow reserve balances, it would not free up core budget for other spending. Assemblymember Susan Hall expressed concern about the lack of clarity on how the Mayor might spend these freed-up reserves, while Assemblymember Bassam Mahfouz sought clarification on whether this saving was already factored into the £138.8 million net benefit. Hammond confirmed these were separate financial benefits.

Transport for London (TfL)

Assemblymember Zack Polanski inquired about the funding for the Mayor's bus and trams fare freeze until July 1st, which Hammond stated would be funded from business rate reserves.

Regarding the DLR extension to Thamesmead, Faye Hammond explained that the GLA would be borrowing upfront to fund the project, with support from the government and future revenue from business rates and TfL fares. While the government had announced £1.5 billion for the project, the exact amount of direct government funding was still under discussion and not yet in the public domain. Assemblymember Unmesh Desai highlighted the potential for tax increment financing (TIF) to fund such projects, a concept previously supported by the committee. Faye Hammond confirmed that the GLA was exploring TIF and that the Thamesmead project was building on previous successful models like Nine Elms. Assemblymember Alessandro Georgiou questioned the sum of business rate retention from boroughs, which Hammond clarified was intended to be half.

Policing and the Metropolitan Police Service (MPS)

Elliot Ball provided an update on the provisional policing settlement, stating that the Metropolitan Police Service (MPS) would receive an additional £111 million in core police grant and £17.7 million from council tax flexibility (£15 per household). He noted that the settlement was light on detail and that ongoing conversations were taking place with the government and the MPS to understand the implications of the grant increase. Assemblymember Susan Hall raised concerns about the MPS's overall budget shortfall and the impact of National Insurance contributions. Ball indicated that the settlement did not threaten the MPS's ability to balance its budget, but acknowledged that unpredictable demand for services, such as protests, posed a significant financial risk.

The committee also discussed the reconciliation of budget figures with public statements made by the Police Commissioner, with Ball explaining that discrepancies could arise due to the dynamic nature of budget processes and evolving financial pressures throughout the year. The potential cost of electric vehicle charges for the MPS was also raised, with Ball noting that exemptions were likely to apply.

London Fire Brigade (LFB)

The committee discussed the London Fire Brigade's (LFB) £12 million deficit, partly attributed to modern firefighter training costs. Faye Hammond acknowledged the financial pressure and the importance of training, stating that the LFB would need to address how to fund these costs sustainably. The potential for a pay award greater than the budgeted 2% was also discussed as a budget risk, with an estimated cost of £4 million per percentage point increase.

Regarding the move to the new LFB headquarters at Albert Embankment, Hammond explained that while capital costs had increased, the move was deemed the most cost-effective option after a robust business case appraisal. The financial implications of the previous collapse of redevelopment plans for Albert Embankment were also raised, with the LFB agreeing to provide figures on the cost to the brigade. The committee also discussed contingency plans for the LFB's move from Union Street to Albert Embankment, with Hammond confirming that an interim solution was part of the business case.

GLA Group Collaboration

Mary Harpley, Chief Officer of the GLA, and Charly Hutson, Director of GLA Group Collaboration, presented on the work of the collaboration program. Hutson highlighted financial savings achieved through shared services, such as the HR shared service with TfL, and cost avoidance measures like collaborative procurement, which had saved an estimated £8 million since 2021. The rollout of the SuccessFactors IT platform for HR systems across TfL, GLA, OPDC, and MOPAC was discussed, with a budget realignment of £1.13 million per year for the next three years. Hutson expressed confidence in the current cost estimates, while acknowledging the potential for technology upgrade costs to fluctuate.

The committee also discussed the GLA's apprenticeship levy usage and the Loved and Wanted campaign, a cross-cutting initiative aimed at promoting social cohesion and tackling hate crime. The campaign, with a budget of nearly £1 million, involves a grant program for community organisations, with recipients to be announced in February. The evidence base for the campaign's focus, including data on hate crime and engagement with various communities, was discussed. Faye Hammond agreed to provide a detailed breakdown of where the £1 million has been allocated.

Equalities

Tunde Olayinka, Executive Director for Communities and Social Policy, Rupinder Parhar, Head of Equalities, and Tom Rahilly, Assistant Director of Communities and Social Policy, discussed the allocation of resources to deliver the Mayor's Equality Objectives. They explained that these objectives are embedded within the GLA's 14 delivery plans and that budget guidance has been centred on these objectives. The refresh of the Equality Objectives, last set out in 2022, is underway.

Assemblymember Alessandro Georgiou questioned the value of Objective 9, which aims for London's workforce to reflect its population, given the Mayor's limited control over this. Tunde Olayinka explained that this objective is addressed through programmes like Supporting Londoners to Benefit from Growth, which focuses on helping disadvantaged individuals access skills and employment. He agreed to provide a breakdown of spending against specific objectives and examples of successful outcomes.

The committee also discussed the impact of the For Women Scotland versus Scottish Ministers judgment on the definition of sex within the Equality Act. The GLA is awaiting final statutory guidance from the government before making any wholesale revisions to its policies. Rupinder Parhar noted that the GLA Group had highlighted concerns about resourcing for any necessary changes in its response to the Equality and Human Rights Commission's consultation.

The committee concluded by noting the report and discussion, delegating authority to the Chairman to agree any output, noting the Mayor's Decision Lists, and noting the committee's work programme and meeting dates. The next meeting was scheduled for 26 January 2026.