By Rosie Day

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Sir Sadiq Khan could not have been clearer at the Mayor’s Question Time when he said that the Government’s Fair Funding 2.0 proposals would hinder London’s growth and stifle its potential. “Now is the time for investment, not further cuts” were his words.

He went on to acknowledge that the formulae which might be used to determine funding for councils from next year do not take into account the capital’s needs. His comments come at a time when London’s social housing waitlists are at a ten-year high – at 320,000 – and providing temporary accommodation to homeless people is costing its boroughs £4m a day.

London Councils’ data shows that only 5% of London’s private rental listings are affordable to households relying on Local Housing Allowance. It is no wonder that 183,000 Londoners (a deeply concerning all-time record) are living in temporary council accommodation.

Cash-strapped local authorities also face a viability conundrum given that the delivery of affordable homes costs 30%-40% more in London than other UK cities due to a combination of land values and wages. Rents don’t come close to covering it.

To take a step back, we must acknowledge that the Fair Funding Review 2.0 consultation rightly advocates reform of our outdated local government funding model – which has remained frozen for over a decade.

If implemented well, greater transparency, the reintroduction of multi-year settlements and fewer restrictions on ring-fenced funding pots could provide councils with greater financial certainty and flexibility.

However, for the system to be truly ‘fair’, the proposed funding formulas must reflect the real needs of local areas. London Councils has estimated that the capital’s already stretched local authorities will be £700m worse off under the proposed changes, despite London having the highest poverty rate in England once housing costs are taken into account.

A further concern lies in the reliance on 2021 Census data, which underestimated London’s population by as many as 300,000 people because of the impact of the Covid-19 lockdowns. Those in the capital will remember how the city emptied out in the “race for space” and the desire to be close to family during a prolonged period of remote working. That trend has, almost completely, reversed and yet ‘fair’ funding could potentially be defined by these outdated figures.

The greatest impact will likely be felt in inner London boroughs such as Westminster and Camden, which stand to lose significant resources needed to fund essential services for its local residents, and indeed, the businesses which help drive London and the nation’s economy.

London’s commercial centre supports 2.2m jobs, generates 11% of the UK’s economic output and raises £5.5bn in business rates, 80% of which is redistributed to fund public services across the country. Its success is inextricably linked to the prosperity of regional economies across the UK.

London’s boroughs face chronic under-resourcing of planning departments, despite growing housing and workspace needs. Underfunded teams often lack the capacity to deliver timely, well-informed decisions on the infrastructure, homes and offices that a global city depends on. Ring-fenced funding for planning is therefore essential – enabling councils to attract and retain skilled staff, strengthen expertise and expand decision-making capacity.

Planning is a proven driver of economic growth. Research by the London Property Alliance found that a more pro-growth planning environment could enable central London to deliver 407,000 jobs, 50,700 new homes and 55.7m sq ft of office floorspace by 2045 – boosting the UK economy by £101bn. Yet this potential is undermined by a 54% fall in major office planning applications determined in central London over the past decade.

If the Government is serious about fair funding, it must give London’s local authorities the resources they need to improve residents’ lives and sustain the capital’s role as the country’s economic engine. Stripping back services as a result of the Fair Funding 2.0 proposals would not just harm London’s communities and businesses – it would undermine national growth, prosperity and the country’s global competitiveness.

Our boroughs already face a £500m shortfall this year and many will need to resort to emergency borrowing measures through the Government’s Exceptional Financial Support scheme. This cannot be what the Government intended – we urge it to reconsider.

Rosie Day is Chief Strategy Officer at London Property Alliance