A London council has warned it may have to impose a 150 per cent council tax rise on residents following government cuts under a new funding settlement.

Hammersmith and Fulham council’s cabinet said it would have raise its council tax after losing more than half of its government grant under Labour’s “fair funding” review, introduced last year, in which places hit hardest by austerity receive more money.

While currently the borough has the third lowest council tax in England, a budget report, seen by , warned that such a rise would cost its Band D households an additional £29.11 a week in 2027/28.

The council is one of six, including Wandsworth and Westminster, that the government is allowing to raise their council tax, with neighbouring boroughs warning they may have to increase the bill by 188 per cent and 200 per cent respectively to meet huge funding gaps.

Government funding for Hammersmith and Fulham will be reduced to just £72.4m over the next four years after receiving £150.5m in 2025/26.

The report says that this increase in council tax would bring in an additional income of £163.9m by 2030/31, which “broadly balances the budget on current assumptions”.

Other scenarios in the report showed that a 100 per cent increase in council tax (£19.40 a week for a Band D property) would still leave a budget shortfall of £46.1m and a 125 per cent increase (£24.25 a week for a Band D property) would short the budget by £20.6m

Councillor Rowan Ree, H&F cabinet member for finance and reform, said on Tuesday: “The government is aiming to make councils with historically low council tax raise them to the national average. We do not support this.

“I have therefore been working closely with my fellow councillors, our officers and our three local Members of Parliament, to vigorously challenge the Government to review these measures. We have presented sound evidence that supports our case.

“However, the likelihood remains that the government's 'Fair Funding' changes will go ahead. Therefore, I am looking at all options to meet the legal requirement to present a balanced council budget for next year and each of the subsequent years over the government's three-year funding settlement.

“We expect that this funding reduction could be equivalent to losing as much as 40 per cent of our total annual budget of £222 million. At the same time, demand and costs for essential services continue to rise.”

He said that already the council had pioneered a 'Ruthless Financial Efficiency' programme which has, since 2014, so far saved a record £156million by modernising services to cut council spending.

A Ministry of Housing, Communities and Local Government spokesperson said: “Local authorities decide the level of council tax they wish to set, but we are clear that in doing so they should put taxpayers first.

“We’ve made over £78 billion available for council finances next year, with the majority of money unringfenced so local leaders can decide how best to spend on their local priorities.

“And we’re fixing an outdated funding system so funding goes where need is greatest, while protecting councils through the transition and ensuring no area faces a cliff edge.”