Investing in local services at the upcoming Spending Review will help generate economic growth in the capital and across the country, a cross-party group of London MPs has heard [1].

Cllr Claire Holland, Chair of London Councils, told a meeting of the All-Party Parliamentary Group (APPG) for London that boroughs and their services play a key role in encouraging growth – including through supporting Londoners into work, delivering new homes and infrastructure, and attracting investment into communities – yet the capital’s worsening homelessness emergency and crisis in town hall finances represent significant barriers to London’s growth potential.

Boroughs in the capital face a funding shortfall of at least £500m this year (2025-26), with London Councils warning of worrying implications for local services. Seven London boroughs are dependent on emergency borrowing (through the current Exceptional Financial Support scheme) to balance their budgets and avoid insolvency [2].

London Councils is seeking sustained investment in local services after more than a decade of structural underfunding and instability – with a focus on funding to support early intervention and prevention services that will help reduce future demand, as well as dealing with immediate pressures in areas such as homelessness and social care.

Boroughs are especially keen to increase housebuilding in the capital in order to tackle the housing crisis. Last week London Councils warned that skyrocketing homelessness costs are pushing boroughs towards bankruptcy, on top of the damaging social and economic impacts. There are 300,000 potential new homes with planning permission granted by London boroughs that are yet to be built, with financial viability representing the biggest barrier to delivering new housing in the capital. Additional investment in affordable housing and local infrastructure will be critical to kickstarting delivery.

Cllr Claire Holland, Chair of London Councils, said:

“The Spending Review is a vital opportunity to deliver investment in local services, housing and infrastructure, in order to boost economic growth.

“The worsening housing emergency and the ongoing crisis in council finances are two huge barriers to growth in the capital. If we don’t get to grips with them, we aren’t going to get growth – it’s as simple as that.

“Boroughs are critical engines of growth, but we are running on empty. The extreme pressures on our budgets are completely unsustainable.

“Restoring financial stability to local government and investing in local services, alongside additional investment in housing and infrastructure, will enable us to turbocharge growth in the capital and across the country.”

Among London Councils’ Spending Review asks is a call for overall council funding to be restored to 2010 levels by 2028-29, requiring real-terms increases of 4% every year.

The cross-party group’s priorities also include increased funding for demand-led services to meet forecast levels of growth, access to a broader range of funding sources, and investment in the early intervention and prevention services that bring the most benefits over the long term.