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Homelessness crisis contributing to £500m shortfall in London councils’ budgets
Boroughs in the capital will need to make over £500m of savings next year to balance their budgets, new analysis from London Councils has found.
Based on its latest survey of council finances, the cross-party group warned that nine in 10 London boroughs expect to overspend on their budgets this year – estimated at over £400m in total across the capital.
The group said pressures on adult and children’s social care, as well as the capital’s worsening homelessness crisis, are the biggest drivers of boroughs’ overspend.
According to a new report outlining its priorities ahead of the Autumn Statement: “London borough finances are on a knife edge.
“Resources remain almost a fifth lower than in 2010 despite there being almost 800,000 more Londoners, exacerbated by over £1bn in unfunded and underfunded new burdens over that period.
“Boroughs face a perfect storm of prolonged high inflation and sustained high demand for services following the pandemic.”
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In August, London Councils estimated that almost 170,000 Londoners – or one in 50 people – are currently homeless and living in temporary accommodation. Boroughs expect to overspend on temporary accommodation by £90m this year.
It is calling on chancellor Jeremy Hunt to include funding support for local services in his Autumn Statement in November, to help stabilise council finances.
London Councils’ key ask is that the statement – in which the chancellor will outline his future spending plans – includes an overall funding increase of at least 9% and investment to reduce homelessness, including through uplifting the Local Housing Allowance (LHA) and the Homelessness Prevention Grant.
It wants government to uprate LHA rates to cover at least the bottom 30% of rents, which it said would save up to £100m across public services.
London Councils is calling for grant funding to acquire private rented sector stock released by landlords, as well as increased investment in new build affordable housing.
The group is also calling for reforms to the “broken” local government finance system, such as giving councils longer-term funding settlements and more devolved powers.
Claire Holland, acting chair of London Councils, said the pressures on borough finances have “grim implications for the future of local services”.
“The combination of higher costs due to spiralling inflation, skyrocketing demand for services, and insufficient levels of government funding leaves boroughs in an extremely precarious position.
“The pressure is relentless – we face a £400m shortfall this year, which rises to £500m next year unless the government provides more support,” she added.
Ms Holland stated that councils “play a vital role” in their communities, providing “essential services and in tackling so many major challenges, such as addressing homelessness, unlocking economic growth, and making faster progress towards net zero”.
“The government must use the Autumn Statement to bolster council finances.
“This will be crucial for helping boroughs stabilise budgets and sustain London’s local services,” she said.
A DLUHC spokesperson said: “Local authorities have seen an increase in core spending power of up to £5.1bn or 9.4% in cash terms in 2022-23, with almost £60bn available for local government in England.
“‘For London Boroughs, this represents an increase in core spending power of up to £744m (9.3%) – making available a total of up to £8.757bn in 2023-24.’
“We stand ready to speak to any council that has concerns about its ability to manage its finances or faces pressures it has not planned for.”
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