London Councils has warned that boroughs will continue to face enormous and unsustainable budget pressures next year, despite government plans to increase funding.
Responding to the publication of the provisional Local Government Finance Settlement for 2024-25, London Councils anticipates a continuing funding shortfall of at least £500m – with worrying consequences for local services across the capital.
The cross-party group says that while the government’s announcement of a 6.4% funding boost for London local authorities will bring some relief, it will not be enough to address all the skyrocketing costs and financial distress boroughs are experiencing.
London Councils highlight that:
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.
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 6.4% funding uplift assumes boroughs will increase council tax rates by the maximum permitted amount, and this will account for over 40% of the increase.
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.
Cllr Claire Holland, Acting Chair of London Councils, said, “We are deeply concerned 2024 looks set to be another year of massive budget pressures and a continuing squeeze on Londoners’ local services.
“The measures announced by the government fall short of what we 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.
“Much of this uplift also relies on council tax rises, which will be extremely difficult for Londoners struggling with the cost of living.
“The entire system of local government funding needs urgent reform. For too long, boroughs in the capital have been left with inadequate resources despite London’s population and demand for services growing fast.”
London Councils is urging 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.