Following the government’s announcement of Exceptional Financial Support (EFS) for local authorities, London Councils has reiterated its call for a sustainable solution to the worsening funding
crisis affecting boroughs.
The cross-party group argues that EFS is a misnomer, as more councils are now forced to rely on emergency borrowing. Rather than restoring financial stability, EFS is piling on debt and increasing servicing costs, leaving councils in an even more precarious position.
Rising reliance on EFS
In 2025-26, seven London boroughs will receive a total of £418 million in EFS—a sharp rise from two boroughs receiving £71 million in 2024-25. Nationally, the number of councils eligible for EFS has more than tripled in just two years, from eight in 2023-24 to 29 in 2025-26.
London Councils’ Spending Review submission highlights the deepening financial strain on boroughs, with a projected funding gap of at least £500 million for 2025-26. Since 2010, funding per Londoner has fallen by 28%, despite rising demand and escalating service costs.
"EFS is no longer exceptional"
Cllr Claire Holland, Chair of London Councils, warned that nearly a quarter of London boroughs would face financial collapse without emergency borrowing:
“Years of underfunding, soaring demand, and skyrocketing costs have created a perfect storm for borough budgets. EFS is no longer ‘exceptional’—it forces councils to borrow just to maintain basic statutory services, leaving them with long-term debts instead of sustainable solutions.”
She called for urgent reform, pushing for:
- Restoration of overall funding to 2010 levels
- Fair distribution of funding based on local need
- Long-term financial stability to avoid further service cuts
The growing cost of crisis
Introduced in 2020, EFS allows councils to take emergency loans from the Public Works Loan Board to manage immediate financial pressures. Without this, many boroughs would have to issue Section 114 notices, signaling they can no longer balance their budgets.
London boroughs are struggling with ballooning overspends, including:
- £180 million on adult social care
- £150 million on children’s social care
- £270 million on homelessness (double the previous year)
The homelessness crisis is a particular financial strain, with boroughs spending £4 million a day on temporary accommodation. London Councils estimates that one in 50 Londoners is homeless, including at least one homeless child per classroom on average.
Without a sustainable funding model, boroughs will continue to face severe cutbacks and rising debt—an unsustainable situation that demands urgent government action. Photo by Philafrenzy, Wikimedia commons.