The funding announced in the provisional Local Government Finance Settlement for 2024-25 will be insufficient to tackle the enormous and unsustainable budget pressures facing London boroughs next year.
We anticipate a continuing funding shortfall of at least £500m facing London boroughs – which will have worrying consequences for local services across the capital.
- Boroughs asked the government for a funding uplift of at least 9% – the same as received in 2023-24 – to help them cope with fast-increasing demand for services, high inflation, and the impact of years of insufficient funding from central government.
- However, the uplift announced for London boroughs in the provisional Local Government Finance Settlement for 2024-25 is 6.4%. It assumes boroughs will increase council tax rates by the maximum permitted amount, accounting for over 40% of the increase.
- Boroughs are already dealing with a £600m funding shortfall this year (2023-24). Nine in ten London boroughs expect to overspend their budgets. Boroughs are seeking to balance their books through efficiencies and use of financial reserves (which can only be spent once), but are also having to make service cuts. London Councils forecasts another substantial funding shortfall next year (2024-25) of around £500m.
- The worsening homelessness crisis is a key factor driving boroughs’ budget instability. One in 50 Londoners is currently homeless and living in temporary accommodation arranged by their local borough. Boroughs expect to overspend on their homelessness budgets this year by nearly £150m.
- Boroughs have suffered from chronic underfunding for too long. London boroughs’ overall resources remain 18% lower in real terms than in 2010. Over the same time period the population has grown and boroughs now serve 800,000 more residents – broadly equivalent to a city the size of Leeds.
- A report earlier this year from the Institute for Fiscal Studies think-tank found London local government funding is 17% lower than its estimated relative need – by far the largest gap of any region in England.
The Impact this will have on your constituents
The measures announced by the government fall short of what London boroughs need. While the funding deal will bring some relief, it won’t be enough to plug the budget gaps we face and restore stability to town hall finances. Boroughs have worked hard to budget and spend efficiently, but there is no painless way to make savings on the scale required. Any low hanging fruit and general efficiencies are long gone.
Unless further funding is provided, boroughs will be forced to cut some of the vital services your constituents rely on. The inadequate settlement means that many boroughs will have no choice but to raise council tax, which will be extremely difficult for Londoners struggling with the cost of living.
Our ask of London MPs
We are now relying on London MPs to make the case to government that this settlement is insufficient ahead of the Parliamentary vote on the final local government finance settlement. To safeguard the services your constituents rely on, London Councils is calling for the government to:
- Continue the Household Support Fund. Launched in 2021 in response to the cost-of-living crisis, this provides councils with funding to assist low-income residents. Across London, boroughs are spending £136m of the fund this year to help households struggling to afford their energy bills, to fund emergency food support services, and to provide support during the holidays to those who receive free school meals. The Household Support Fund is due to end in April 2024 but boroughs say ongoing cost-of-living pressures mean these resources are still needed.
- Deliver longer-term funding for adult and children’s social care. Like councils around the country, London boroughs are grappling with major costs associated with adult and children’s social care. London Councils forecasts a collective overspend in the capital of £350m in adult and children’s social care this year. More funding stability is desperately needed, with a greater focus on prevention to ease the acute pressures on the system.
- Reform the broken local government finance system. This must include giving councils multi-year (three to four-year) funding settlements and more devolved powers. Boroughs want to be less reliant on council tax and central government funding, so they are better placed to sustain local services and serve their communities’ needs.
If you have any questions on this, please feel free to respond to this email directly or contact Daniel.kosky@londoncouncils.gov.uk or amy.leppanen@londoncouncils.gov.uk.
