Budgets for local councils set at over £69bn
In a bid to address the care crisis and restore trust in public services, the government has announced an additional £3.7bn for local authorities across England, including an £880million uplift to the Social Care Grant compared to 2024-25. However, London Councils, the umbrella body for London's boroughs, warn that the settlement may not be enough to bridge the financial gap faced by these boroughs.
The local government finance settlement for 2025-26, awaiting approval from the House of Commons, promises over £69bn for England's councils. Yet, London Councils' new research suggests boroughs across London will face a £500m funding gap despite the promised increase.
Cllr Claire Holland, chair of London Councils, states that London's boroughs are under enormous financial strain due to more than a decade of structural underfunding. She notes that more and more boroughs are being forced to seek Exceptional Financial Support (EFS) from the government to stay afloat. Two boroughs previously required EFS arrangements, but the number has increased to at least seven for the upcoming financial year.
The boroughs' struggles can be attributed to overspends in areas such as social care, homelessness, adult social care (£180m), children's care (£150m), and the housing crisis (£270m). Cllr Holland emphasizes the importance of London's boroughs, as they provide vital local services, contribute to delivering new homes, and drive economic growth.
However, the new funding formulas risk substantial cuts, do not adequately address London's specific needs, and fail to provide sufficient transitional support. This exacerbates the challenges faced by boroughs, compounded by inflation and increased demand for public services. For example, councils like Kensington and Chelsea anticipate large funding reductions phased over several years, despite raising council tax.
London has the highest poverty rates in England, with one in four Londoners living in poverty. Inner and East London boroughs have significantly higher poverty and linked service needs, increasing their funding vulnerability if allocations do not match local circumstances.
Jim McMahon OBE, minister of state for local government and English devolution, aims to work with local leaders towards a fairer funding model that addresses regional inequality and prioritizes outcomes for local people. He intends to end short-term solutions and rebuild the sector for a more stable future.
Cllr Holland expresses concern about the worsening homelessness emergency in London, stating it represents the biggest single risk to borough finances. London Councils estimate that at least one in 50 Londoners is homeless. Boroughs spend around £4m a day on temporary accommodation for homeless individuals.
In conclusion, despite the local government finance settlement for 2025-26, London boroughs face ongoing financial challenges because the new funding formulas risk substantial cuts, do not adequately address London's specific needs, and fail to provide sufficient transitional support, all exacerbated by inflation and high local poverty levels.
- The funding gap faced by London's boroughs, forecasted to be around £500 million despite the promised increase in the local government finance settlement, necessitates a reassessment of the funding formulas to provide adequate transitional support and address London's specific needs.
- In light of the increasing demand for social services such as adult social care, children's care, and homelessness services, and the overspends that come with them, there is a need for the local government and business sectors to collaborate towards long-term financial solutions that can help alleviate the financial strain on local authorities.
- The ongoing financial struggles of London's boroughs, worsened by inflation and high poverty levels, highlight the urgent need for the general-news sector to shed light on the issue and for political leaders like Jim McMahon OBE to work diligently towards a fairer funding model that prioritizes regional equality and the wellbeing of local communities.
