London’s local councils are facing a combined budget shortfall of £5.2 billion over the next four years, according to London Councils, the organisation representing the capital’s 33 boroughs.
The updated forecast, compiled from figures supplied by all 33 local authorities, is worse than the £4.7 billion gap the group predicted last October. London Councils said boroughs are contending with a shortfall of almost £1.2 billion in the current financial year alone, which it attributed to rising demand for social care, homelessness support and special educational needs services.
More Boroughs Turn to Emergency Support
Nine London boroughs are now relying on the government’s Exceptional Financial Support scheme, up from seven in October. The scheme allows councils under financial strain to take out emergency loans in order to balance their budgets.
London Councils has previously described the support scheme as “a misnomer,” raising concerns that it saddles boroughs with additional debt without addressing the underlying sustainability of their finances.
Funding System Called ‘Broken’
Stephen Cowan, chair of London Councils, said funding for local authorities had “failed to keep pace with skyrocketing costs and demand for services,” adding that “everyone knows the local government finance system is broken.”
Cowan said the government’s upcoming budget presented “an opportunity to help stabilise town hall finances, give boroughs more fiscal tools, and support the local delivery we all want to see.”
Despite the worsening long-term outlook, London Councils noted that the gap forecast for the current year is smaller than the nearly £1.5 billion shortfall it had projected for the 2026-27 financial year back in October, before the government finalised changes to council funding through its Fair Funding Review.
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