Government reforms to the way councils are funded could leave London’s town halls hundreds of millions of pounds worse off, risking core services and undermining the capital’s competitiveness, business leaders have warned.
BusinessLDN – which represents more than 170 of the city’s largest employers – urged ministers to ensure that the proposed Fair Funding Review takes into account the city’s higher living costs and areas of deprivation.
Analysis by umbrella group London Councils suggests boroughs will receive £700 million less than they would under current funding arrangements if the reforms go ahead.
BusinessLDN said the capital’s councils had already seen spending power “squeezed significantly” since 2010. For example, Camden Council has experienced a 13% fall in real terms over that period, despite increasing council tax.
In a letter to Local Government Minister Jim McMahon, Chief Executive of Business LDN John Dickie warned that under the latest funding formula proposals, other inner London town halls could see further cuts of 11–12% in real terms over the next three years, even if they raise council tax to the maximum level permitted level.
“It would be deeply concerning if local authorities in the city were left without the resources they need to provide the basic services that their residents and businesses rely upon,” Mr Dickie said.
“This would undermine the perception of London as an attractive place to live, work and invest – and in turn, jeopardise the Government’s growth mission and the ambition for the UK to be the most rapidly growing country in the G7.
“We urge you to ensure that the Fair Funding Review 2.0 takes these factors into account and delivers a reformed system that works for London and the whole UK.”
He highlighted rising pressures on social care, special educational needs, and homelessness, alongside London housing costs that are among the highest in the country.
Despite the capital’s relatively high average incomes, one in four households lives in poverty once housing costs are considered, Mr Dickie added.
BusinessLDN said cuts to services such as planning, environmental management and street cleaning could damage the city’s ability to attract investment.
The government has said it wants to “strengthen and simplify” town hall budgets and bring “an end to wasteful, competitive bidding for funding pots and move towards multi-year financial settlements that give local leaders the certainty and stability they need to plan for the future”.
But London Councils has challenged the plans.
The group is “gravely concerned” about what it describes as unevidenced proposals that had not been properly road-tested.
Claire Holland, the chair of London Councils, said: “This would have major implications for our most vulnerable groups of residents: London has the highest rate of poverty in the country once housing costs are factored in, and one in 50 Londoners is homeless and living in temporary accommodation.”
