The funding crisis facing councils

  • By London Councils

Local government has been at the forefront of the response to Covid-19, demonstrating its vital role in the social and economic fabric of communities across the country. However, the pandemic has put councils’ financial survival in doubt. While we welcome the emergency financial support so far provided, we now urge the government to:

  • secure the immediate financial position by fully compensating councils for the financial impact of the pandemic to date, including support for lost Council Tax and Business Rates. In London this will require at least an additional £1.1 billion (based on London Councils' latest analysis of boroughs' finance pressures). Without certainty around this funding councils will have to make short-term emergency spending cuts which will undermine longer-term recovery.

We are also calling on the government to create as much certainty as possible for the coming three years by:

  • urgently announcing 2021/22 funding, grants and council tax principles
  • ensuring councils are adequately resourced to fulfil their new and existing roles and in managing the on-going pandemic and associated social distancing in future years
  • helping London boroughs close their budget gaps through annual above-inflation increases that also take account of underlying demand pressures in key services, including adult and children’s social care (which requires an additional £430 million), public health (£130 million), homelessness (£200 million), high needs education funding (£300 million) and supporting people with no recourse to public funds (£50 million).


To ensure long-term financial sustainability, the government should work with councils to resolve key issues including service devolution, social care, business rates reform and new funding sources. We should aim to build a new settlement to underpin the long-term funding of local government, including new sources of revenue and greater fiscal devolution.

Read our investment case