Commenting on the Public Accounts Committee’s new report on council finances, London Councils agrees with its assessment of a “fast-approaching cliff edge for under-pressure authorities.”
Boroughs in the capital face a funding shortfall of at least £500m this year, according to London Councils’ analysis.
Cllr Claire Holland, Chair of London Councils, said:
“Many local authorities are already teetering on the brink after more than a decade of structural underfunding, growing demand, and rising costs.
“The continuing crisis in town hall finances has worrying implications for Londoners’ local services. Worsening pressures also undermine our ability to contribute to priorities we share with the government, including investing more in prevention, boosting delivery of new homes, and generating economic growth.
“We all know the local government finance system is complex and outdated – now we want to see the bold reforms that we have needed for years.
“We will work with the government on setting a different direction, starting with its funding reform plans. London boroughs must secure resources that match the high levels of need, deprivation and cost of delivering services we face in the capital.”
London Councils welcomes the committee’s focus on many of the key concerns for boroughs as they grapple with enormous budget challenges. These concerns covered by the committee’s report include:
- The government’s Exceptional Financial Support (EFS) policy is a short-term, unsustainable approach to managing councils’ budget crises. Seven London boroughs now require EFS from the government to balance their budgets for 2025-26, the highest rate of any region in the country, and London Councils has described the EFS regime as a “misnomer”. EFS is an emergency measure that effectively forces councils into further borrowing or selling assets rather than addressing structural funding issues.
- Growing council overspends relating to temporary accommodation and special educational needs. London accounts for 56% of all England’s homeless households in temporary accommodation. Boroughs collectively spend £4m every day on temporary accommodation and have seen skyrocketing overspends on their homelessness budgets. Almost half of London boroughs are at heightened bankruptcy risk due to ballooning SEND deficits.
- Budget pressures are undermining councils’ ability to invest in prevention, leading to fewer early intervention services. London Councils is arguing that more resources for prevention now will reduce demand in years to come, helping to deliver improved value for money as well as better outcomes for Londoners.
- The importance of the government’s plans for reforming the council funding system and better reflecting local authorities’ needs. In its response to the Spending Review, London Councils said that the planned reforms are now “make or break” for boroughs’ finances.