Outlook for London boroughs' finances 'is bleak'

London Councils is calling for additional funding for boroughs, to prevent any more facing effective bankruptcy

More councils in London will face effective bankruptcy unless the government provides more funding support, according to new analysis from London Councils.

The cross-party group said the capital's borough councils faced a collective £700m funding shortfall, mainly due to housing and homelessness pressures.

It said shoring up borough finances was critical for boosting their ability to help tackle the housing crisis.

The government said it planned to "fix the foundations of local government" and said it would "work closely with the sector to do so".

The "skyrocketing" number of homeless Londoners has put pressure on councils

London Councils, an organisation that represents London's 32 borough councils and the City of London, said "skyrocketing" numbers of homeless Londoners requiring temporary accommodation and "the worsening state of social housing budgets" threatened the overall stability of borough finances.

It said that stabilising council budgets was its "top priority" and added it was necessary, not just to tackle the housing crisis, but also to drive economic growth.

London Councils has sent a submission of its analysis to the Treasury ahead of the government's budget on 30 October.

Boroughs are facing ever-increasing levels of demand for services, for example a 10% increase in those needing temporary accommodation between April 2023 and April 2024.

London Councils estimated that boroughs were currently collectively spending approximately £3m every day on temporary accommodation, like hotels, for homeless people.

'Wreaking havoc'

London councils has now written to the government, ahead of the budget calling for additional funding for boroughs, to prevent any more facing effective bankruptcy.

It said it had also asked for a review into how funds were distributed, and said the current system had not been updated since 2013.

Councillor Claire Holland, Chair of London Councils, said: “The housing crisis is having a devastating impact on Londoners’ lives and wreaking havoc on town hall finances across the capital."

She added: “At a time when we need to invest in social housing and support homeless Londoners, boroughs are facing an unrelenting squeeze on our resources.

"The unavoidable reality is that spiralling costs and years of underfunding threaten to break boroughs’ budgets."

Ms Holland said the current outlook for London borough finances was "bleak", but added they were "committed to working with the government to find a better way forward."

'More funding stability'

A Ministry of Housing, Communities and Local Government spokesperson said: "We are facing the most acute housing crisis in living memory, with record levels of homelessness and too many families living in temporary accommodation in our towns and cities, including in London.

"We are taking action and developing a long-term strategy with councils and local leaders to end homelessness for good.

"We'll also provide councils with more funding stability, end competitive bidding for pots of money and reform the local audit system."