London boroughs teeter on brink of bankruptcy: Millions warned of service cuts as council tax bills soar

By 2030, the city’s 33 council’s face a collective shortfall of £5.2 billion, analysis released on Tuesday suggests.

Ahead of the Chancellor’s Budget on October 28 Stephen Cowan, chair of London Councils, warned funding had “failed to keep pace with skyrocketing costs and demand for services”.

He added: "Everyone knows the local government finance system is broken.”

More than half a dozen London local authorities are now on the verge of effective bankruptcy.

Nine town halls in the capital now receive Exceptional Financial Support from the Government, which allows struggling councils to take out emergency loans to balance their budgets to avoid going bust.

They have warned of significant cuts may have to be made to some services, including parks, culture, youth, housing and health programmes.

It comes as five boroughs - Kensington and Chelsea, Westminster, City of London, Wandsworth and Hammersmith and Fulham - were given permission by ministers to hike council tax by more than 5%, the usual ceiling for increases.

The cost of housing homeless families is putting extreme pressure on town hall coffers, with boroughs now spending £5.5million a day on the issue, the cross-party London Councils said.

Barnet, Croydon, Haringey, Havering, Hillingdon, Lambeth, Redbridge, the City of London and Waltham Forest - are currently receiving EFS from the Government to balance their books.

The City of London was allocated £2.65 million from the fund to manage financial pressures within its Housing Revenue Account.

In its submission to the Autumn Budget, London Councils said Government plans to devolve more powers to local authorities could bring “exciting opportunities” to the capital, but warned the funding crisis was threatening to destabilise local services.

Mr Cowan: “London is a leading global city and the powerhouse of the UK economy, but granting London more autonomy is critical to sustaining this success.

“Strengthening London boroughs by devolving new fiscal resources would put us in a much stronger position to tackle London’s challenges, grow the economy, and maximise London’s contribution to the public coffers.

“The benefits would be felt not only by Londoners but by communities around the country.

“Boroughs have a vital role to play, but are too often held back by enormous budget pressures.

“As we plan how best to invest in local services, to build housing, and to grow our economies, a worsening funding gap looms large over everything we do.

“For too long, the funding available to us has failed to keep pace with skyrocketing costs and demand for services.

“Everyone knows the local government finance system is broken. The upcoming Budget is an opportunity to help stabilise town hall finances, give boroughs more fiscal tools, and support the local delivery we all want to see.”

The Government’s Fair Funding Review improved funding levels for some London boroughs, but saw the city’s overall share for local authorities reduced.

After adjusting for inflation, it will be almost 17% lower in 2028 than in 2010.

A Government spokesman said: “Local authorities decide the level of council tax they wish to set, but we are clear that in doing so they should put taxpayers first.

“We’ve made over £78 billion available for council finances next year, with the majority of money unringfenced so local leaders can decide how best to spend on their local priorities – alongside fixing an outdated funding system, so funding goes where need is greatest.”