London (Parliament Politics Magazine) – London boroughs warn of collapse by 2028 amid a £4.7bn funding gap, prompting tax rises and cuts to essential services across the capital.
As reported by The Standard, recent “eye-watering” figures show nearly half of London councils risk bankruptcy within years.
The capital’s councils are projected to face a £4.7bn shortfall by 2029, forcing “inevitable” service cuts and tax rises across London.
What did the data reveal about council funding gaps in London?
London councils face a warning that soaring homeless housing costs, rising social care expenses, and funding reforms are pushing many capital boroughs toward crisis.
The cross-party group warned that more London councils will need emergency borrowing to avoid issuing Section 114 notices and financial collapse.
A record seven London boroughs, Lambeth, Newham, Havering, Croydon, Enfield, Barnet, and Haringey, needed government support to cover a £1 billion funding gap.
London councils’ analysis, conducted with the Society of London Treasurers, suggests 17 boroughs could face financial distress by 2028. It warned that Labour’s Fair Funding Review would reduce the capital’s share of central government funding.
The government is set to confirm reforms in the coming weeks, shifting funding from London to shire districts and unitary authorities.
London Councils said it is
“continuing to make the case for an approach which reflects the capital’s high levels of need, deprivation and the cost of delivering services.”
What did Claire Holland warn about the London borough finances?
Claire Holland, Chair of London Councils and Lambeth leader, stated,
“These eye-watering figures show the frankly impossible financial challenge facing boroughs and the prospect of an enormous funding gap opening up in the coming years.”
She said,
“After more than a decade of structural underfunding, the resources available to boroughs are nowhere near enough to meet the spiralling cost of providing vital local services to Londoners.”
Ms Holland stated,
“Research from the IFS has previously shown London has the widest gap between resource and need of any region in the country when it comes to council funding.”
She said,
“The current proposals set out in the Fair Funding Review 2.0 risk exacerbating these pressures on borough budgets.
The council’s leader added,
“Without an approach that reflects London’s high levels of need, deprivation and the cost of delivering services, further rounds of cuts are sadly inevitable and many more boroughs will be pushed into emergency measures to avoid bankruptcy.”
She added,
“The worsening crisis in council finances serves no one’s interests. Boroughs will continue working with the government to seek a solution that puts the sector back on a sustainable footing, after years of uncertainty and financial instability.”
How will new grants impact London’s high-demand boroughs?
Officials said they are aware of the serious challenges facing local councils, with London experiencing the highest demand for temporary accommodation.
The government announced a £69bn financial settlement for 2025-26, providing a 6.8% boost in cash terms for local authorities.
The June Spending Review included £5bn in new grants over three years, including £3.4bn through the multi-year Local Government Finance Settlement.
Key facts about the UK Fair Funding Review 2.0
The UK Fair Funding Review 2.0 aims to establish a fairer system by targeting local council funding to where it is most needed. It assesses councils’ relative needs, service delivery costs, and capacity to raise Council Tax.
The reform will affect councils differently, hitting London boroughs the hardest. New funding will be phased in over three years, starting in 2026-27.