The combined impact of further funding reductions and rising demand is likely to leave London boroughs needing to make estimated savings of around £2 billion over the next four years. Over the same period, boroughs also plan to use around a third of their earmarked reserves to balance their budgets. This is not sustainable.
London is not alone. The Local Government Association estimates the sector overall will face a funding gap of £7.8 billion by 2025, and this assumes local authority services ‘stand still’, only having to meet additional demand and deal with inflation costs. It does not include any extra funding needed to improve services, meet unfunded burdens or to reverse any cuts made to date.
£4bn cut from core funding for local services in London between 2010 and 2020
A growing number of authorities are experiencing extreme and increasingly well publicised financial distress as a result of a decade of ever intensifying pressure. There has been one high profile financial failure and many others are openly discussing drastic funding controls and service cuts.
Research by PwC found that over a quarter (28 per cent) of respondents lack confidence that they will be able to make the necessary savings while delivering quality services and outcomes over the next year. The same survey found that three quarters (74 per cent) of respondents expect some councils to get into serious financial crisis in the next year, up from 54 per cent last year.
£2bn more saving required in the next four years for London boroughs unless more money is made available in the spending review
After a decade of funding cuts, London Councils is calling for an overall increase in funding for local government in next year’s Spending Review. This must be informed by a full assessment of spending pressures facing the sector based on information from across all government departments that fund local government.