The government’s upcoming Spending Review presents a crucial opportunity to end the financial instability plaguing London’s local councils and unlock the city’s economic potential, according
to London Councils.
The cross-party group emphasizes boroughs’ commitment to fostering growth, particularly through the delivery of much-needed affordable housing. However, achieving this goal depends on securing stable financial support.
London Councils’ latest analysis reveals that boroughs face a staggering £500 million funding gap for the 2025-26 financial year. At least seven boroughs will be forced to seek emergency borrowing under the government’s Exceptional Financial Support scheme to balance their budgets.
With the Spending Review determining funding allocations across all government departments for the next three years (2026-27 to 2028-29), London Councils is calling for substantial investment in local services to reverse over a decade of underfunding. Current figures indicate that boroughs receive approximately 28% less funding per resident than they did in 2010.
A call for restored funding
London Councils is urging the government to restore overall council funding to 2010 levels by 2028-29. This would require annual real-terms increases of 4% to ensure boroughs can maintain essential services and support economic growth.
In its submission to the Spending Review, the organization outlines five key priorities:
Financial Sustainability – Many boroughs are nearing bankruptcy, making improved funding support critical to sustaining local services.
Housing – London faces the country’s most severe housing crisis, with one in 50 Londoners currently homeless and living in temporary accommodation. Boroughs need greater resources and policy flexibility to address homelessness and accelerate the construction of affordable homes.
Economic Growth – As the UK’s global city, London is vital to the nation’s economic future. Boroughs play a key role in delivering sustainable, inclusive growth. To maximize their impact, London Councils advocates for an integrated funding settlement and formal shared decision-making between the Mayor and boroughs—similar to governance structures in other regions.
Prevention – Investing in preventative services can deliver long-term benefits, improving mental and physical health, expanding access to education and employment, and generating wider social and economic advantages.
Regulatory Reform – Over the past decade, local authority regulations have become increasingly complex and costly. London Councils calls for reforms to streamline assurance processes, reducing unnecessary financial burdens while supporting sector-led improvements.
Securing London’s future
With London’s boroughs at a financial tipping point, the Spending Review offers a pivotal chance to restore stability, strengthen services, and drive economic growth. By addressing these funding challenges, the government can help boroughs not only survive but thrive—ensuring a stronger future for both the capital and the nation.
Cllr Claire Holland, Chair of London Councils, said:
“Investment in local government is critical to driving inclusive economic growth in the capital and across the UK.
“Councils have a pivotal part to play in supporting the government’s growth ambitions, particularly when it comes to building much-needed new homes in the capital. We need the tools and resources to make this happen.
“After years of permacrisis in council finances, the Spending Review is a vital opportunity to turn things around and deliver a more sustainable financial future. Securing long-term investment will enable boroughs not only to survive, but thrive as local champions for growth.” Photo by GJMarshy, Wikimedia commons.