£1.4bn funding gap in London due to pandemic

London boroughs have warned that local services in the capital face a £1.4 billion funding black hole this year due to the impact of coronavirus.

According to London Councils, the pandemic has ‘played havoc’ with council finances, as spending on key services skyrockets while income has plummeted.

Boroughs’ latest estimates of the overall financial impact of coronavirus will exceed £2 billion this year – up from £1.9 billion last month. Boroughs have so far received £587 million in emergency funding from the government, leaving a £1.4 billion gap. The estimated additional expenditure required because of the virus has increased by £130 million since June, largely due to rising demand for adult social care and homelessness and rough sleeping services.

Boroughs anticipate income losses of over £1.1 billion. Of that, £460 million will come from lost fees and charges income. The full detail of the compensation scheme announced by government in July is yet to appear, but boroughs believe it will only cover around half of these losses.

Peter John, chair of London Councils, said: “Boroughs have played a crucial role in London’s response to Covid-19. We’re proud that we helped more than 5,000 rough sleepers into emergency accommodation, delivered more than 80,000 food parcels to vulnerable residents, and secured millions of items of PPE for use in our local communities. All this work has been essential for keeping Londoners safe and slowing the spread of the virus.

“However, the pandemic has played havoc with our finances. In March the government assured councils that it would do ‘whatever is necessary’ to support our efforts to help residents and businesses through the pandemic. But the extra money provided so far is not nearly enough to cover our costs. Boroughs are instead left facing a massive £1.4 billion shortfall. We’re extremely concerned about the implications for London’s local services, which so many Londoners rely on, and the capital’s post-pandemic recovery. The government must move quicker to stabilise council finances and to commit to long-term, sustainable funding for the sector as part of its upcoming Comprehensive Spending Review.”