London Councils’ latest finance pressures survey has revealed a fast-deteriorating situation for town hall budgets across the capital.
According to its new analysis, London boroughs are set to overspend [1] on their original budget plans by almost £600m this year (2023-24).
London Councils’ forecast of the boroughs’ collective annual overspend has increased by 50% due to a spike in spending between June and September [2].
The cross-party group attributes this to ballooning demand for local services — especially homelessness support. London faces the most severe homelessness crisis in the country, with London Councils estimating that one in 50 Londoners is currently homeless and living in temporary accommodation arranged by their local borough.
The capital’s skyrocketing homelessness rates and chronic shortage of affordable housing has led to enormous cost pressures on boroughs. London Councils estimates boroughs will collectively overspend on their homelessness budgets this year by £150m.
With the Chancellor due to deliver his Autumn Statement setting out future spending plans, boroughs are calling for urgent action to stabilise council finances and avoid a domino effect of Section 114 notices across the country.
London Councils’ key priorities for the Autumn Statement include:
- An overall funding increase of at least 9% (in line with what was received at last year’s Autumn Statement).
- Investment to reduce homelessness, including through uplifting the Local Housing Allowance and Homelessness Prevention Grant.
- Reforms to the broken local government finance system, such as giving councils longer-term funding settlements and more devolved powers.
Cllr Claire Holland, Acting Chair of London Councils, said: “London’s worsening homelessness crisis is wreaking havoc on council budgets. With one in 50 Londoners homeless and living in temporary accommodation arranged by their local borough, the human cost is enormous and financial cost utterly unsustainable.
“Alongside massive demands on adult and children’s social care services, spiralling inflation, and insufficient funding from government, boroughs are left in an extremely precarious position.
“The Chancellor must use the Autumn Statement to help councils weather the storm. We urgently need more funding support to stabilise budgets and sustain local services.”
London boroughs’ resources remain almost a fifth (18%) lower than in 2010, despite there now being almost 800,000 more Londoners — broadly equivalent to a city the size of Leeds. This has been exacerbated by over £1bn in unfunded and underfunded new burdens over that period, such as the government transferring responsibility to local authorities for financing Council Tax Support and a host of other measures.
London Councils also highlights a recent report from the independent Institute for Fiscal Studies think-tank that found London local government funding is 17% lower than its estimated relative need — by far the largest gap of any region in England.
[1] Councils have a legal duty to balance their overall budgets. Overspending in one service area will require savings in another or use of the council’s reserves. In the most extreme cases, Section 114 notices are issued when a council cannot meet its forecast spending.
[2] London Councils issued a warning last month on boroughs’ finance pressures, based on a survey of boroughs’ spending in June 2023. However, London Councils’ most recent survey data covers boroughs’ spending in September 2023 and shows that overspends have become even higher.
London Councils now forecasts a collective overspend for 2023-24 of £600m — with a third of boroughs forecasting overspends of over £20m compared to their original budget plans. Over £350m of this is in adult and children’s social care representing 7% and 9% overspends on respective budgets. An overspend of around £150m is forecast in homelessness, where the borough average overspend is almost 50%.
