Overview
Prior to the Autumn Statement, London boroughs were facing a funding gap of £2.4 billion over the next four years, including an immediate £700 million shortfall in 2023/24 – the toughest financial outlook that London boroughs have faced since 2010.
Measures in the Autumn Statement, such as the repurposed funding for adult social care reform, additional direct funding for adult social care, compensation for freezing business rates, and additional flexibility to raise council tax will help to considerably reduce the overall funding gap for London local government in 2023/24. However, additional increasesin council tax will be a hugely difficult decision for boroughs given the wider cost of living pressures on residents. Despite all these measures, the funding gap won’t be completely closed – so council leaders will still face tough decisions to balance budgets next year.
More broadly, the government has again opted for short-term sticking plasters rather than delivering long-term solutions to fund local government in a sustainable way.
Impact of key announcements for London local government
Council tax
- The council tax referendum limit will rise from 2% to 3% in 2023/24, with the adult social care precept flexibility rising from 1% to 2%.
- If all London boroughs chose to utilise these additional flexibilities, an additional £80 million would be generated next year. However, imposing greater council tax rises at a time when residents face rising cost-of-living pressures will be a challenging decision for authorities.
Adult social care
- The new ring-fenced funding for adult social care discharge funding, worth £400 million in 2023/24, and £600 million that will be channelled through the Better Care Fund and Improved Better Care Fund is welcome.
- The delay in implementing new adult social care reforms to October 2025 as called for by London Councils, is a good decision on balance, given the scale and complexity of the proposed reforms and wider pressures in the system.
- Repurposing the funding earmarked to deliver the reforms through the Social Care Grant will also help address wider pressures in both adult and children’s social care.
Business rates
- The transitional business rates relief scheme will insulate London businesses from large bill increases after the 2023 business rates revaluation and provide much-needed support alongside the broader business rates freeze.
- London boroughs may expect to receive an additional £180 million as compensation for the funding increase that they would have received if rates had risen by CPI inflation. Early confirmation of this funding is very helpful for local authorities.
Housing and homelessness
- Social rents will be capped at 7%, which will provide vital help for social tenants with rising living costs. However, this increase will come at a cost: independent modelling commissioned by London Councils suggests it would leave London boroughs with a £100 million shortfall in their Housing Revenue Account budgets for next year. This will mean less funding for maintenance, building safety and retrofit programmes.
- Boroughs are also hugely concerned about rising homelessness, with Local Housing Allowance rates frozen as private rents continue to skyrocket in the capital. It is more important than ever that the proposed reforms to the Homelessness Prevention Grant, which would see London boroughs’ share of funding reduce, are paused and reconsidered.
Cost-of-living
- The various measures set out to support with the cost of living – uprating benefits, protecting pensions, the continuation of the Household Support Grant and the increased
Energy Price Guarantee – will help to support the most vulnerable Londoners.
- However, despite these measures, the Institute for Fiscal Studies suggest that real household disposable income is set to fall by 7% over next two years, and so demand for local authority services from the most vulnerable residents is set to continue.
Local authority energy costs
- The Energy Bill Relief Scheme will not continue for public sector bodies from April, with the government only committing to a review into the scheme for businesses, due to conclude by 31 December. Energy costs for councils will, therefore, rise considerably from April. We urge the government to consider this as part of the review of the scheme for businesses.
Looking ahead to the Local Government Finance Settlement and beyond
These announcements could help to considerably reduce the overall funding gap for London local government in 2023/24 however, the details won’t be confirmed until the Provisional Local Government Finance Settlement in December. London boroughs will also still face some very tough decisions, as demand on services will continue to be high.
Through the Autumn Statement, the government has opted for short-term sticking plasters to plug gaps rather than deliver long-term solutions – particularly with regards to social care. Further council tax increases risk heaping more of the funding burden onto a tax that is long overdue reform, and business rates are once again being propped up by freezing rates and ever more reliefs. While these funding interventions may help boroughs get through the current crisis – these stop-gap funding solutions show the government is thinking both topdown and short-term.
London local government needs adequate resources, a better balance of funding and a broader range of revenue raising powers to ensure boroughs can continue to deliver vital local services to Londoners in the long term.
