Lack of local government funding
- London boroughs have suffered from chronic underfunding for too long. Boroughs’ overall resources in 2023-24 will remain 18% lower in real terms than in 2010-11. Over that period, the number of council workers shrank by a third (80,000 staff), despite delivering an increasing number of services, and serving almost 800,000 (10%) more residents.
- London boroughs face a challenging outlook this year. Despite a 9% increase in funding at the 2023-24 Local Government Finance Settlement, boroughs will need to make over £100 million of savings to balance budgets. This is equivalent to a year of care for 10,000 Londoners in nursing homes.
- Similarly, the 7% cap on social rents in 2023-24 – vital to supporting social renters through the cost-of-living crisis – has created a £100 million shortfall in London borough Housing Revenue Accounts (HRAs) this year.
Centralisation of power
- Local government finance is in desperate need of reform, largely because it is so closely controlled by central government. The highly centralised local government funding system is holding councils back from delivering the best outcomes for residents. Councils have limited ability to raise council tax, few powers over business rates, and most of the grant funding they receive comes with central prescriptions or ringfencing.
- The approach to the 2023-24 Local Government Finance Settlement continued a short-term and top-down approach to funding local government. Social care continues to be propped up by a range of different grants; incentives to grow business rates have been further eroded by another business rates freeze; and funding becoming increasingly reliant on council tax rises.
- The overall formula used by the government to distribute core funding to councils is now a decade out of date. London’s local needs and demography have changed significantly since then.
- There are also too many funding streams with a range of different, centrally governed strings attached, which cannot easily be combined to be spent on local priorities.
- Planning finances beyond 2024-25 is almost impossible as funding remains very uncertain. Councils have now had five single-year funding settlements in a row since 2019-20 and, while much of the funding for 2024-25 has been confirmed, uncertainty remains over key funding streams such as the New Homes Bonus. This prevents boroughs from planning their budgets over the medium term and, ultimately, from using most effectively for their residents.
- Longer term funding certainty is vital so that London boroughs can provide early preventative support that makes a huge difference to people's lives, whilst also saving the wider public purse.
Need to empower local government
- London Councils wants boroughs to access a broader range of resource-raising powers to reduce reliance on council tax and business rates, as well as longer term un-ringfenced funding allocations, so they can invest in improving local services for Londoners. We continue to support the recommendations of the London Finance Commission (2017).
- Polling of London businesses indicates a high level of support for further devolution of powers and funding to London local government.
- The Covid-19 pandemic showed what London boroughs could do when properly funded and given the powers to deliver more for our residents. We urge the government to work closely with the local government sector in the next two years to ensure funding reforms can be delivered as soon as possible in the next parliament.
Devolution of employment and skills
- London’s economy is strong, but its labour market still faces challenges post pandemic. In-work poverty levels are high in London – 38% of London’s universal credit claimants are in work. The youth unemployment level in the capital remains above pre-pandemic levels and is significantly above the national average.
- London government has a strong track record of delivering employment and skills services, often to the most disadvantaged Londoners. In 2023, almost all (89%) of London boroughs provided an employment service, collectively spending just over £39 million and supporting just under 43,000 Londoners to search for a job.
- But London boroughs can and want to do more to support Londoners into work, progress in their careers and drive inclusive growth across the capital. They are well positioned to do so because the sheer scale and diversity of London often requires a local approach. London boroughs understand their local economy and the characteristics of local jobseekers and can adapt their services to these. Many Londoners face several and sometimes complex barriers to getting a job, so employment services need to be integrated with other services. This is manageable at a local level to deliver holistic, place-based support. Strong links with employers are vital to link supply side interventions with employer demand. Boroughs have strong relationships with local employers and use their own contracts to create job opportunities and social value.
- London Councils wants to agree an ambitious devolution deal for employment and skills in London, which would include:
- A fully devolved, ‘local first’ approach to all employment support services, where services are provides at the most feasibly local level, enabling join up with other local services and better support for the most disadvantaged Londoners. We will develop local gateways into careers, employment and skills provision.
- A fully devolved single skills fund: The fund would have multi-year funding (at least three years) to allow for longer term planning and support for Londoners – addressing the short-term funding and fragmentation of the current system. It would include the Adult Education Budget (already delegated to the Mayor of London), 16-18 skills provision, careers advice, apprenticeships, UK Shared Prosperity Fund (or successor fund) and Further Education Capital Funding.
- The government could signal its intent in this area by making Universal Support and WorkWell Partnerships fully devolved. These are successor programmes to the Work and Health Programme which is already delegated to London boroughs via sub-regional partnerships, announced in the budget.
