Fixing the crisis in borough finances must be a “clear Budget priority” and represents an “essential step on the path to achieving national missions”, London Councils has said.
As the government prepares to unveil its Budget on Wednesday, London Councils is highlighting the £700m funding shortfall facing boroughs next year – with skyrocketing homelessness costs a major concern in the capital.
The cross-party group recently revealed the number of homeless Londoners living in temporary accommodation has reached a record high of over 183,000. Almost half (90,000) of these Londoners are children. London Councils estimates there is at least one homeless child in every London classroom.
London boroughs’ spending on temporary accommodation has jumped 68% in a year, with local authorities in the capital now collectively spending £4 million every day on this provision for homeless residents.
London Councils is looking for Budget measures to stabilise local government funding. Boroughs emphasise how crucial this is for sustaining Londoners’ local services and boosting their ability to help tackle housing pressures, drive economic growth, and contribute to other national priorities.
Cllr Claire Holland, Chair of London Councils, said:
“Boroughs find themselves in a dire financial situation. Fourteen years of structural underfunding, combined with fast-rising demand for services and inflated costs, have left borough finances in a state of crisis.
“Housing and homelessness pressures in the capital are astronomical. If things carry on as they are, boroughs will be tipped over the edge into effective bankruptcy, requiring costly interventions from central government to balance the books.
“Stabilising local government finances should be a clear Budget priority. Boroughs are critical to delivering new homes and driving economic growth, working in partnership with the government. Putting councils on a stable financial footing is an essential step for the government on the path to achieving its national missions.”
Among its Budget asks to the government, London Councils is seeking:
A 7% real-terms uplift to Core Spending Power in 2025-26 (broadly in line with this year’s increase) to help cover the £700m funding gap.
A doubling of the Homelessness Prevention Grant (London boroughs were allocated £157m in 2024-25) and a removal of the cap on temporary accommodation subsidy rates that has been frozen since 2011.
A commitment to updating Local Housing Allowance rates annually to track market rents and help ensure adequate support for low-income private renters.
