London Councils has welcomed the Spending Review announced by the Chancellor as an opportunity to bring “desperately needed” stability to council finances.
Responding to the Chancellor’s speech, the cross-party group said that a stable financial footing will “strengthen boroughs’ role as drivers of local growth”.
Boroughs are making the case for action to stabilise the local government funding system. Priorities include:
- Additional funding. To stabilise finances and prevent any more boroughs being forced to issue Section 114 notices (effectively declarations of bankruptcy), increased investment is needed. London Councils estimates boroughs face a £700m funding gap across the capital next year (2025-26).
- Fairer funding. The distribution of government funding needs to become more reflective of local needs. The government’s core funding formulae have not been updated since 2013 and a ‘fair funding review’ is urgently required.
- Funding certainty. Boroughs are seeking long-term funding settlements of at least three years and fewer bidding pots where councils compete for funding from the government. Greater funding certainty will enable better planning and strategic investment in prevention.
- Greater financial autonomy. With more financial freedoms and devolved powers, boroughs will be in a stronger position to sustain services and encourage local economic growth. These could include measures such as 100% business rates growth retention for London, powers to create a new tourism levy, and ensuring government grants are un-ringfenced by default (i.e. do not come with burdensome restrictions).
Cllr Claire Holland, Chair of London Councils, said:
“We welcome this Spending Review as an opportunity to bring desperately needed stability to town hall budgets and strengthen our role as drivers of local growth.
“Turning the tide on the council finance crisis is crucial for tackling so many of the UK’s most pressing challenges. Whether boosting housebuilding, making faster progress on net zero targets, or arranging social care support that keeps people out of hospital, councils and the services we provide for residents and businesses are essential.
“Insufficient and unpredictable funding has resulted in unsustainable pressures on council finances, as London’s population has grown and demand for services – particularly social care and homelessness support – has skyrocketed.
“Restoring stability to boroughs’ finances will put us in a much stronger position to work in partnership with the government on our shared priorities and help make a positive contribution to its national missions.”
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