Hounslow’s finances rescued by Government policy change

Hounslow House, offices of Hounslow Council

The Government’s introduction of Fair Funding 02 throws Hounslow a £60m lifeline – but don’t expect your Council Tax to be any lower

Recent changes in the way local government is funded will put £60m in Hounslow’s coffers over the next three years. The timely injection of cash comes at a time when the cost of adult and children’s social care is soaring, and every London borough is struggling to cope with the cost of housing the homeless.

Hounslow has had to take money out of its reserve funds over the past year to balance the books and is about to set its budget for the coming year, so the timing could not be more opportune.

Council Leader Cllr Shantanu Rajawat with Executive Director of Finance and Resources Jake Bacchus at the Chiswick Area Forum on Monday 19 January

Council Leader Shantanu Rajawat Finance director Jake Bacchus go through the figures at the Chiswick Area Forum

The Leader of Hounslow Council Cllr Shantanu Rajawat and its Executive Director of Finance and Resources Jake Bacchus were at the Area Forum in Chiswick town hall last night to explain the Council’s finances and how they plan to manage the windfall.

They heard just before Christmas that Hounslow would be a net gainer in the reorganisation of the way local authorities are funded, but they are now able to put a figure on it – £20m a year for the next three years.

READ ALSO: Hounslow Labour welcomes Fair Funding decision

The change, which Jake Bacchus described as one of the biggest in 20 years to the way individual authorities are funded, is not a one-off handout but a redistribution of money towards more deprived areas which will continue to benefit Hounslow beyond the current three-year settlement, unless or until Hounslow becomes an area which is no longer characterised as ‘deprived’.

The various budgets Hounslow Council manages

How our money is spent

Most people have no idea what their Council Tax money pays for. The Council Leader and Finance Director started with an excellent power point explanation which, if it isn’t already, should be part of the Citizenship curriculum in every school.

While there are separate budgets for housing, capital spending, treasury management and the Lampton Business Plan, the General Fund is the Council’s main day to day budget which pays for most of the services that residents use – waste collection, libraries, parks, community safety, street cleaning.

How the General Fund is funded

More than half the General Fund comes from central government. Just less than a quarter comes from our Council Tax. The contribution from Business Rates is much smaller – only 7% – as Hounslow merely collects it and passes most of it direct to central government and they Mayor of London’s office to be distributed.

How the General Fund is spent

The lion’s share of spending goes on funding social care – care homes, sheltered accommodation, dementia care, children who for whatever reason are not living with family, children with Special Educational Needs (SEN). The cost of children and adult’s social care has increased massively post Covid, growing by £8m a year in Hounslow.

We all know we have an ageing population but the impact in stark figures of what that costs us is shocking. The Council receives 7,000 requests per annum for Adult Social Care support.

READ ALSO: Care leavers under 25 set to receive full council tax relief

Hounslow has 400 children in the Social Care system and over £1,000 users of SEN transport.

Chiswick’s councillors at the Chiswick Area Forum meeting; L to R: Cllr Ron Mushiso; Chair of the meeting Cllr Jack Emsley; Council officer Chaspal Sandhu; Cllr John Todd (seated); Cllr Gerald McGregor (standing); Cllr Gabriella Giles; Cllr Joanna Biddolph; Cllr Amy Croft; Cllr Ranjit Gill

How is our money managed?

If you ask a politician how Hounslow manages its money you will get an answer which comes with a big dollop of their party’s political agenda.

READ ALSO: Hounslow Council’s £240m gamble is a ticking timebomb, says Cllr Jack Emsley

The Tories say the budget has been mismanaged and the Council is on the verge of bankruptcy, blaming the specific arrangement this Council uses to manage its housing and recycling – Lampton 360, a wholly owned subsidiary which is a commercial company that is not making any money, that the Opposition see as an albatross around the Council’s neck.

Cllr Shantanu Rajawat with Chiswick Conservative Cllr Gerald McGregor, one of the Council’s biggest critics when it comes to management of the budget

Labour say we are doing better than many other councils precisely because the budget has been managed well.

READ ALSO: Hounslow Council Leader Shantanu Rajawat responds to criticism over Hounslow’s finances

The Council has been hit by circumstances beyond its control – the spiralling care budget and the housing crisis which have created huge challenges to all London councils, and which have been exacerbated by high inflation (every 1% inflation adds £4m a year to costs, and inflation is currently at 3.2%).

They have taken the decision to borrow, to provide the services people need, but many of us have mortgages and understand sometimes you need to borrow. They have invested in housing, which will generate income as the occupants will pay rent, so it’s fine.

Services to residents

I asked the Executive Director of Finance and Resources for an objective assessment. He said he did a lot of work to benchmark and compare how Hounslow is doing, compared with other councils.

London has the largest group of councils which have had to go to the Government to ask for Exceptional Financial Support – seven that the public know about, and another three of which they don’t.

“We are not one of them. Our reserves are very low. They were reduced significantly in 2025-6, but those authorities which needed help did not have the reserves to dig into”.

Cllr Shantanu Rajawat and Jake Bacchus 

The Fair Funding settlement is “perfect timing”

Hounslow used £28m of its reserves in 2025-6 and has had to find savings of £26m to balance the budget this year.

Cllr John Todd asked him to confirm Lampton 360 had made accumulated losses of £15.7m. The finance director confirmed that figure was correct.

“Year on year it will reduce”, he added, but “to remove the £15.7m loss will take time”.

Former Chiswick councillor Sam Hearn raised the financial problems of schools. Increasing numbers were running deficit budgets. The finance director confirmed that 17 of the 89 schools in Hounslow were in that situation and agreed it was a “cause for concern”.

It is not hard to see that to continue in that way is not sustainable. The Fair Funding 2.0 settlement is “perfect timing”, said Jake Bacchus, but there was “no complacency”.

Setting a balanced budget – outlook for 2026/7

Speaking at a time when there is a transatlantic war of words going on over the sovereignty of Greenland and the imposition of tariffs on Europe if we don’t agree to Donald Trump’s demands, he said:

“I have no idea what a tariff increase might mean [for the finances of LB Hounslow.] We need to build up reserves for whatever the next rainy day might be”.

When asked by a member of the audience whether his financial planning over the next three years factored in Council Tax rises to the maximum allowed – 4.99% – he at first deflected – it was a matter for Council Members to decide – but when pressed agreed he would recommend a full increase each year.

Distribution of Government funding to local authorities under the Fair Funding Review 2.0

In an unusual display of cross-party solidarity, Leader of the Conservative Group Cllr Peter Thompson congratulated the Council’s leadership on the management of the budget.

“Well done”, he said, “it’s a tricky area”.

He acknowledged that potholes and “the bits we get cross about” were a small percentage of the budget they were managing.

“We all want Hounslow to succeed. It benefits no one if we fail”.

He thanked Shantanu for inviting him to Cabinet meetings so the Opposition was involved in decision making even though they represented only one sixth of elected councillors.

“I appreciate your support” the Council Leader replied.

The draft budget will be considered by the Cabinet on Tuesday 20 January, then by the Overview & Scrutiny Committee on 26 January, again by the Cabinet on 10 February and will go before the full Borough Council on 2 March

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