London Councils has warned that borough finances will be “stuck in survival mode”, following the provisional Local Government Finance Settlement for 2025-26, unveiled shortly before Christmas.
While welcoming the additional investment in frontline services and steps being taken to reform the broken local government funding system, London Councils anticipates that boroughs will still be left with a £500m funding shortfall amid immense service pressures and spiralling costs.
Chair of London Councils, Cllr Claire Holland, said: “Borough finances look set to be stuck in survival mode. After fourteen years of structural underfunding, spiralling costs, and fast-rising demand for services from residents in need, the strain on borough budgets is enormous.
"We welcome the additional support being provided by the government and the increase to homelessness funding is a step in the right direction. However, we are concerned about resources for temporary accommodation being squeezed, and this is a key funding pressure in the capital. Overall, boroughs are still grappling with significant shortfalls, making it harder to protect local services.
“The government has rightly committed to reforming the broken council funding system. We will continue to work with ministers on restoring stability to borough finances and ensuring next year’s Spending Review brings the long-term investment we need. This is crucial so that boroughs can keep delivering local services for Londoners, putting prevention at the heart of our work, and driving inclusive growth across the capital.”
