London boroughs facing “catastrophic” £1.3billion financial black hole


London boroughs are facing a “catastrophic” £1.3billion financial black hole caused by coronavirus, council leaders warned.

The London Councils group, which represents local authorities across the city, told MPs crippling cuts to services will take place unless the government “honours its promise” to pay back the money they have spent during the Covid-19 crisis.

Boroughs have paid out millions over the last three months on housing all rough sleepers, providing PPE and delivering food and medication.

By the end of the financial year there will be £1.8billion of extra pressure on boroughs due to Covid-19, London Councils estimates. They told MPs they will collectively lose £1.1billion through income loss and £700million through increased expenditure.

In March Local Government Secretary Robert Jenrick said local authorities would be provided with “whatever funding is needed” to tackle the crisis. But so far the capital’s councils have received just £518million in additional emergency funding.

Chair of London Councils Peter John said: “Boroughs have played a crucial role in London’s response to Covid-19, but the pandemic has blown an enormous hole in finances. Today we’re warning London MPs that boroughs face a £1.3billion funding shortfall – even with the government’s emergency support.

“This massive gap has severe implications for local services across the capital like social care, housing, and public health, which so many Londoners depend on. Boroughs are determined to work with the government to find a sustainable solution. This must mean extra funding to help balance budgets and ensure services keep getting the resources they need to support London’s recovery.”

Redbridge Council this week started a petition demanding the government pay back the extra £45million it has spent so far dealing with the pandemic. The borough said it has paid out an additional £60.5million during the crisis but received just £15.7million from central government.

Council leader Jas Athwal said: “We stepped up during the national crises and put in place essential services to protect residents.

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“It is outrageous that the government is now withholding almost our entire annual budget for council services at a time when our residents are really struggling. They must honour their promise to properly compensate us.”

John Biggs the mayor of Tower Hamlets, which has some of the highest poverty levels in the UK, said “lifeline” local services were being put at risk.

“The government has not delivered to local councils who have been at the frontline of helping their residents in response to coronavirus,” he said.

“We were assured that we should do ‘whatever it takes’ to support them, but ministers have rolled back on this funding promise. Local services are again being put at risk, when now, more than ever they are a lifeline for our most vulnerable and are needed to help us take steps towards recovery. Without additional support the cuts will be catastrophic.’’

The government said it had offered London boroughs an “unprecedented package of support to ensure they have the resources to provide services during the pandemic”.

A spokesman added: “We have given London councils £518million in additional emergency funding as part of a total of over £5.3billion of government support for communities and businesses across the city during the pandemic.

“We are working on a comprehensive plan to ensure councils’ financial sustainability over the year ahead and we will update as soon as we are able.”

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