Charles Wright: What does Sadiq Khan’s budget tell us about City Hall’s powers?

The annual budget-setting debates at City Hall rarely generate more light than heat, and this year’s have not broken with tradition.

In theory, the 25-strong London Assembly is at its most powerful, having the ability to amend the spending plans of the Mayor if enough of its members can agree on changes they want made. But the required two-thirds majority, which would involve a cross-party agreement between 17 or more Assembly members (AMs), has never been achieved.

That gives the annual final session a particularly performative character, and yesterday’s, at which Sir Sadiq Khan’s budget for the financial year 2025/26 was approved, was no exception. Conservative, Liberal Democrat and Green AMs quite literally went through the motions of opposition, their separate bids to get the Mayor to do things differently all bound to fail.

So what did we actually learn? Firstly, the process is a reminder that the mayoralty is big business – it has a gross 2025/26 revenue budget of almost £15.5 billion, plus a £4.9 billion capital programme. However, the bulk of that spending goes on the Metropolitan Police Service – some £5 billion – and on meeting Transport for London’s operating costs of around £8.3 billion. City Hall’s direct spending, at a little over £2 billion, is, as an earlier budget meeting this year heard, a relatively small amount for the Mayor of a city of nine million people.

Where does the money come from? The focus of the meeting was on the Mayor’s Council Tax demand, added annually to the 32 London boroughs’ own levies. For the coming year that will raise £1.5 billion via a four per cent or £18.98 hike on last year’s figure, taking City Hall’s average Band D demand to £490.38. But that’s a small part of the Mayor’s income. For 2025/26, the rest will come mainly from TfL’s £7.3 billion “farebox” and other sources, from £3.75 billion in Business Rates, from City Hall’s own reserves and from a £2.6 billion government grant for the Met.

It was police funding that provoked most debate. The government money was a welcome boost, but still left work to do to make up for successive reductions in government support since 2010, said Khan. So the bulk of the Council Tax take , £1.16 billion, would go on what the Mayor was trumpeting ahead of the meeting as “record” City Hall spending on the Met.

It’s a big shift over recent years, with the capital’s Council Tax payers now providing a quarter of police funding. But with Met Commissioner Sir Mark Rowley continuing to warn of a £260 million funding gap, due to the “cumulative impact” of funding cuts, rising costs and increasing demand, Khan would not be drawn ahead of final announcements next month on whether an overall reduction in police numbers could be avoided.

Khan should do more, said Tory AMs, who include last year’s defeated mayoral contender Susan Hall. She agreed with Reform UK AM Alex Wilson that the Mayor was making a “political choice”, to spend money on “net zero and climate virtue signalling” rather than on policing. It was possible to do two things at once, said Khan, while drawing a distinction between revenue and capital. The Tory proposals for boosting police funding via a swathe of City Hall and TfL staffing cuts, including axing four of Khan’s nine deputy mayors, were defeated.

The same fate awaited a Lib Dem call to appoint a City Hall disability equality champion, funded from Business Rate reserves, and a wide-ranging Green Party bid for more toilets on the TfL network, more pedestrian crossings, a pilot drugs consumption room and work on private sector rent controls and mapping contamination on the city’s land, paid for by a £1 increase in the Congestion Charge plus a contribution from reserves, both also fell, again leaving the budget intact.

Meanwhile the detail of the 79-page budget document revealed both optimism and some concern about the Mayor’s two development corporations, the London Legacy Development Corporation (LLDC) on the 2012 Olympics site and the Old Oak and Park Royal corporation (OPDC) in west London.

It would take until the mid-2030s, as long-term housing developments were completed, for City Hall subsidies to the LLDC to come to an end, Khan conceded, while continuing economic pressure and a housing market downturn were adding delays and hiking the costs of the corporation’s programme. And the transfer of the Queen Elizabeth Olympic Park’s loss-making London Stadium into direct City Hall control, came with a price tag this year of £19.5 million.

The OPDC, surrounding the Old Oak Common HS2 station now under construction, was entering an “exciting phase” however, Khan said, with Whitehall agreement secured for it to oversee development on all public land within its boundaries and deals in place on 90 per cent of the private-owned land required. The budget set out a capital funding boost to £96 million in 2025/26 to complete site assembly and begin work on a “new urban district” with 9,000 homes and three million square feet of workspace.

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