The government’s Spending Review presents a crucial chance to resolve the ongoing financial crisis in town hall budgets and stimulate economic growth in London, according to London Councils.
This cross-party group emphasises the commitment of boroughs to foster growth within their communities, particularly by increasing the supply of affordable housing. However, they caution that achieving this goal hinges on having stable financial resources.
London Councils' analysis reveals that boroughs are facing a £500 million funding gap for the next fiscal year (2025-26). At least seven London boroughs will need to resort to emergency borrowing under the government's Exceptional Financial Support scheme to balance their budgets.
As the Spending Review will determine budget allocations for all government departments for the next three years (2026-27 to 2028-29), London Councils is advocating for significant investment in local services following a prolonged period of underfunding and instability. Currently, boroughs in the capital receive approximately 28% less funding per resident compared to 2010.
One of the key demands from London Councils is to restore overall council funding to 2010 levels by 2028-29, which would require annual real-term increases of 4%.
In their submission to the Spending Review, London Councils outlined their priorities across five main themes:
- Financial sustainability for local government. With growing numbers of boroughs on the brink of bankruptcy, better funding support is desperately needed if boroughs are to sustain London’s local services.
- Housing. This is a key challenge in the capital. London faces the most severe housing and homelessness pressures in the country, with one in 50 Londoners currently homeless and living in temporary accommodation. More resources and flexibilities are required for tackling homelessness and delivering new affordable homes.
- Growth. London is the UK’s global city. Boroughs are vital to delivering sustainable, inclusive growth in London that contributes to the UK’s future prosperity. Measures for achieving this should include an integrated funding settlement for London, with formal shared decision-making arrangements between the Mayor and boroughs over relevant powers and funding to ensure effective delivery, in line with other parts of the country.
- Prevention. With greater investment in preventative services, London boroughs can ensure positive long-term outcomes that improve mental and physical health, deliver access to better education and employment opportunities, and bring wider social and economic benefits.
- Assurance. In the last decade, the regulation of local authorities has grown steadily and become overly complex, lacking co-ordination, and brought significant unrecognised financial costs. Boroughs want reform of the assurance regime so that it supports sector-led improvement while reducing costs to the public purse.
Cllr Claire Holland, Chair of London Councils, said:
“Investment in local government is critical to driving inclusive economic growth in the capital and across the UK.”
“Councils have a pivotal part to play in supporting the government’s growth ambitions, particularly when it comes to building much-needed new homes in the capital. We need the tools and resources to make this happen.
“After years of permacrisis in council finances, the Spending Review is a vital opportunity to turn things around and deliver a more sustainable financial future. Securing long-term investment will enable boroughs not only to survive, but thrive as local champions for growth.”
Image credit: iStock
