London Councils warns of budget shortfall

London Councils has revealed that London boroughs will need to make more than £500 million of savings next year in order to balance the books.

The cross-party group surveyed council finances and is warning that nine in ten London boroughs are expecting overspend this year.

London Councils warned of a perfect storm of prolonged high inflation, fast-increasing demand for services, and insufficient government funding, which could lead to a growing risk of financial and service failures.

The biggest drivers of overspend are growing pressures on adult and children's social care, as well as the worsening homelessness crisis.

London Councils estimates that 1 in 50 Londoners, around 170,000 people, are currently homeless and living in temporary accommodation arranged by their local authority.

Boroughs are calling for urgent action to support local services and stabilise council finances.

London councils has set out its key priorities for the Autumn Statement, which is due in November. The priorities include: an overall funding increase of at least 9 per cent (in line with what was received last year); investment to reduce homelessness, including through uplifting the Local Housing Allowance and Homelessness Prevent Grant; and reforms to the broken local government finance system, such as giving councils longer-term funding settlements and more devolved powers.

Cllr Claire Holland, acting chair of London Councils, said: “Borough finances are on a knife edge – with grim implications for the future of local services in the capital.

“The combination of higher costs due to spiralling inflation, skyrocketing demand for services, and insufficient levels of government funding leaves boroughs in an extremely precarious position. The pressure is relentless – we face a £400m shortfall this year, which rises to £500m next year unless the government provides more support.

“Councils play a vital role in their communities providing essential services and in tackling so many major challenges, such as addressing homelessness, unlocking economic growth, and making faster progress towards net zero.

“The government must use the Autumn Statement to bolster council finances. This will be crucial for helping boroughs stabilise budgets and sustain London’s local services.”

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