Update on London boroughs’ funding outlook, December 2022

  • By Daniel Kosky

Briefing on the Provisional Local Government Finance Settlement 2023/24


The 2023-24 Provisional Local Government Finance Settlement was published on 19 December. The settlement confirms the distribution of funding for London boroughs in 2023-24 following the key funding announcements in the Autumn Statement and a local government finance policy statement by the Secretary of State on 12 December. 

London boroughs will receive a £740m increase (9.2% cash or 5.8% real terms) in funding next year – in line with the average for local authorities across England. This is the largest increase since 2010. 

However, while this uplift will help to reduce the overall funding gap facing London boroughs, a shortfall will remain. The impact of high inflation and heightened demand for council services due to the cost-of-living crisis mean council services will remain under pressure and London borough leaders will face tough decisions to balance budgets next year.

Around a third of the increase relies on boroughs increasing council tax by the maximum amount. Even if all boroughs raise council tax by the maximum 5% permitted – a hugely difficult decision given the cost-of-living pressures on residents – London Councils estimates boroughs will still need to find up to £100m of savings next year. 

Impact of key announcements for London local government

Core spending power

  • For local government across England, core spending power (CSP) – the government’s measure of overall core funding – will increase by £5.0bn (9.2% from £54.5bn to £59.5bn.
  • London boroughs will see an increase of £740m (also 9.2%) from £8.01bn to £8.75bn.
  • However, around £240m (a third of the total increase) is predicated on all boroughs raising council tax to the maximum permitted level (5%).
  • Despite this increase, CSP will remain 18% below 2010 levels in real terms for London boroughs (13% across England).

Council tax

  • The core council tax referendum limit will rise from 2% to 3% in 2023-24 and 2024-25, with flexibility to raise the social care precept increasing from 1% to 2%.
  • The GLA is consulting on a provisional B and D precept increase of £27.89 (7.1%) for the 32 boroughs. The provisional precept for council tax payers in the City of London has increased by £22.26 (18.9%).
  • Imposing greater council tax increases during the current cost-of-living crisis will be a challenging decision for many authorities.

Adult social care

  • The funding uplift will particularly boost support for adult social care (ASC) services. Around £2.8bn (55%) of the overall increase in CSP comes from an increase to ringfenced funding for social care in 2023-24 (totalling £555m in London). 
  • This includes up to £572m in additional ASC precept; an increase to Social Care Grant of £1.3bn; a new ASC Discharge Grant worth £300m and an increase of £400m to support ASC Market Sustainability and Improvement – both aimed at addressing discharge delays and social care waiting times.
  • The wider reforms to ASC funding have been postponed to 2025 and around £1.3bn of the funding earmarked to deliver them in 2023-24 repurposed as Social Care Grant (SCG), ringfenced to spend on adult and children’s social care.
  • New funding directly for social care therefore totals around £1.3bn in 2023-24 nationally, and £314m in London.
  • The government has continued to distribute SCG using a formula that only reflects adult social care need rather than including children’s social care, despite councils being able to spend the fund on both. London Councils estimates boroughs will lose out on around £133m as a result in 2023-24, and a cumulative £572m by 2024-25 since the SCG began in 2017-18. 

Business Rates

  • The government has confirmed that councils will be compensated for the freeze in business rates – equivalent to September CPI inflation (10.1%) totalling around £250m for London boroughs (£1.5bn nationally). 

London Councils' call to MPs and peers

  • Like adult social care, children’s social care services in London are under immense pressure. However, the distribution of the Social Care Grant only reflects relative adult social care needs rather than children’s social care needs. As more funding is channelled through this grant (£4.5bn by 2024-25) this is increasingly inequitable. London Councils is calling for a change to this distribution for the final settlement and encourages London parliamentarians to raise this with Ministers. 
  • This is the fifth one-year funding settlement in a row and has come late in December with some large grants (for Public Health and Homelessness Prevention) still unconfirmed. While the policy statement on 12 December has set out some intentions for 2024-25, much is still unconfirmed. This continual uncertainty hinders councils’ ability to plan strategically over the medium term.
  • More broadly, the government has again opted for short-term sticking plasters to plug gaps rather than deliver any meaningful long-term solutions. Neither fundamental reform to funding needs assessments nor business rates baselines will be implemented before 2025-26. This again perpetuates uncertainty and perceived fairness with formulae unchanged since 2013-14.
  • London Councils wants to see significant reform of local government finance so that boroughs have more resource-raising powers and are less reliant on council tax and central government grants. Boroughs are grateful for anything MPs and peers can do to push the government on new policy solutions to ensure local government can be funded in a sustainable way. 
Daniel Kosky, Parliamentary Officer