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Half of London boroughs are facing bankruptcy in the next few years, “eye-watering” new figures show. The capital’s town halls will collectively be £4.7 billion short of covering the costs of providing services by 2029, resulting in “inevitable” cuts and council tax rises. The rocketing price of housing homeless families, increasing social care bills and planned reforms to council funding are pushing many boroughs to the brink, London Councils warned on Thursday. The cross-party group said a growing number of councils in the capital will require emergency borrowing from central Government to avoid issuing Section 114 notices and effectively declaring bankruptcy. This year a record seven London boroughs – Lambeth, Newham, Havering, Croydon, Enfield, Barnet and Haringey - required Government bailouts to stay afloat as the funding gap jumped to £1 billion. London Councils’ analysis, based on a survey of all 33 London local authorities organised by the Society of London Treasurers, suggests this could rise to 17 boroughs by 2028. Claire Holland, Chair of London Councils and Lambeth leader, said: “These eye-watering figures show the frankly impossible financial challenge facing boroughs and the prospect of an enormous funding gap opening up in the coming years. “After more than a decade of structural underfunding, the resources available to boroughs are nowhere near enough to meet the spiralling cost of providing vital local services to Londoners. “Research from the IFS has previously shown London has the widest gap between resource and need of any region in the country when it comes to council funding.” London Councils predicts the plans set out in the Labour’s Fair Funding Review 2.0 would significantly reduce London’s collective share of cash from central Government. A decision on the reforms, which are likely to redistribute money away from London and towards shire districts and unitary authorities, is set to be confirmed in the coming weeks. London Councils said it is “continuing to make the case for an approach which reflects the capital’s high levels of need, deprivation and the cost of delivering services”. Many town hall have already made cuts to services, such as libraries, children’s centres, waste collection, road maintenance, and sports and leisure facilities, while residents have faced maximum council tax hikes. Ms Holland added: “The current proposals set out in the Fair Funding Review 2.0 risk exacerbating these pressures on borough budgets. “Without an approach that reflects London’s high levels of need, deprivation and the cost of delivering services, further rounds of cuts are sadly inevitable and many more boroughs will be pushed into emergency measures to avoid bankruptcy. “The worsening crisis in council finances serves no one’s interests. Boroughs will continue working with the government to seek a solution that puts the sector back on a sustainable footing, after years of uncertainty and financial instability.” The Government has said it is “under no illusion about the scale of the issues facing local government” and acknowledged that temporary accommodation pressures “are not evenly distributed, with particularly high demand in London”. Earlier this year, it announced the £69 billion financial Settlement for 2025-26 - a 6.8 per cent cash terms increase. At the Spending Review in June, more than £5 billion of new grant funding over the next three years was also announced, including £3.4 billion of new grant funding delivered through the multi-year Local Government Finance Settlement.
