The government’s Spending Review is a vital opportunity to end the “permacrisis” in town hall budgets and boost economic growth in the capital, London Councils says.
The cross-party group highlights boroughs’ determination to champion growth in their communities – especially through boosting delivery of new affordable homes – but warns that this requires stable finances.
London Councils’ analysis shows boroughs will be left grappling with a £500m funding shortfall in the coming year (2025-26). At least seven London boroughs will require emergency borrowing as part of the government’s Exceptional Financial Support scheme to balance their budgets.
With the Spending Review setting budget levels across all government departments for the following three years (from 2026-27 to 2028-29), London Councils is making the case for much-needed investment in local services after a prolonged period of underfunding and instability. Boroughs in the capital receive around 28% less funding per Londoner compared to 2010.
Among London Councils’ key asks is a call for overall council funding to be restored to 2010 levels by 2028-29, requiring real-terms increases of 4% every year.
In its submission to the Spending Review, the umbrella body presented its priorities around five themes:
Financial sustainability for local government. With growing numbers of boroughs on the brink of bankruptcy, better funding support is desperately needed if boroughs are to sustain London’s local services.
Housing. This is a key challenge in the capital. London faces the most severe housing and homelessness pressures in the country, with one in 50 Londoners currently homeless and living in temporary accommodation. More resources and flexibilities are required for tackling homelessness and delivering new affordable homes.
Growth. London is the UK’s global city. Boroughs are vital to delivering sustainable, inclusive growth in London that contributes to the UK’s future prosperity. Measures for achieving this should include an integrated funding settlement for London, with formal shared decision-making arrangements between the Mayor and boroughs over relevant powers and funding to ensure effective delivery, in line with other parts of the country.
Prevention. With greater investment in preventative services, London boroughs can ensure positive long-term outcomes that improve mental and physical health, deliver access to better education and employment opportunities, and bring wider social and economic benefits.
Assurance. In the last decade, the regulation of local authorities has grown steadily and become overly complex, lacking co-ordination, and brought significant unrecognised financial costs. Boroughs want reform of the assurance regime so that it supports sector-led improvement while reducing costs to the public purse.
Cllr Claire Holland, Chair of London Councils, said:
“Investment in local government is critical to driving inclusive economic growth in the capital and across the UK.
“Councils have a pivotal part to play in supporting the government’s growth ambitions, particularly when it comes to building much-needed new homes in the capital. We need the tools and resources to make this happen.
“After years of permacrisis in council finances, the Spending Review is a vital opportunity to turn things around and deliver a more sustainable financial future. Securing long-term investment will enable boroughs not only to survive, but thrive as local champions for growth.”
