Boroughs warn of £700m funding gap and ‘toughest of tough decisions’ for local services

Boroughs in the capital need to make £700m of savings next year unless the government boosts funding for local services, London Councils has warned.

The cross-party group says savings on this scale will inevitably mean reductions to London’s local services. This in turn risks jeopardising efforts to drive economic growth and support residents struggling with the cost of living.

Declaring that boroughs face their most challenging financial outlook since 2010, London Councils’ analysis shows:

  • The energy crisis, soaring inflation, and rising demand for services has put huge additional financial pressures on boroughs’ budgets and opened a wide gap between the funding received and the amount spent on local services. Based on the government’s current funding plans, London boroughs face a gap of up to £400m this year and £700m in 2023-24.
  • The £700m funding gap is equivalent to London boroughs’ total annual spending on public health services.
  • £700m would also pay for retrofitting 27,000 homes to help achieve London’s net zero goal delivering 46,000 apprenticeships to boost young Londoners’ skills and employment opportunities, or a year of care for 64,000 Londoners in nursing homes.
  • In total, the forecast funding gap for London local government is £2.4bn over the next four years. Although boroughs have worked hard to maintain spending on vital frontline services, this level of financial pressure means extremely difficult decisions will need to be made over future service provision.

London Councils highlights that underfunding of local services in the capital is a longstanding issue. Boroughs’ overall resources are 22% lower in real terms compared to 2010, even though London’s population has grown by almost 800,000 (a 10% increase).

The group reports that boroughs find themselves forced to consider options they have previously avoided as much as possible, including cutbacks to social care, bin collections, and homelessness services.

As the government prepares to unveil its plans for the public finances, London Councils is therefore seeking protection for the local services that communities rely on and which make such a crucial contribution to economic and social well-being.

It emphasises that any further reductions to council funding will lead to even more painful service cuts. The group argues for a repeat of actions taken by the government at the height of the Covid-19 emergency, which saw ministers boost funding to help local authorities cope with the severe financial shock and ensure services could be sustained.

Cllr Georgia Gould, Chair of London Councils, said:

“The funding outlook for boroughs is beyond bleak. The scale of the savings required is colossal and will inevitably mean cuts to the vital frontline services that so many Londoners rely on.

“Boroughs will do everything we can to protect our communities but a £700m funding gap next year will force us into the toughest of tough decisions unless the government offers new support.

“Just as ministers worked effectively with councils at the height of the Covid-19 pandemic, we need a similar spirit of partnership in the face of the cost-of-living emergency. Properly funding local services is essential for supporting struggling households and building economic growth in our communities.

“We’re urging the government to listen to councils’ concerns and take swift action to avoid a bad situation becoming even worse.”


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