London’s local authorities have played a vital role in responding to coronavirus. Between the outbreak of the pandemic and the end of this May, they collectively distributed over 36,000 individual grants to businesses worth almost £150 million, helping them to weather the storm and protecting countless jobs.
They have helped support tens of thousands of Londoners who were shielding, and they have worked with the government to tackle local outbreaks and roll-out the vaccine. Having been a crucial part of the city’s resilience, they are now focused on driving an inclusive economic recovery from the pandemic
But London’s boroughs are under increasing financial pressure – a challenge that predates the pandemic and has now been aggravated by it. Across the city they saw a growing financial squeeze in the years preceding the crisis. The amount of grant funding received by the 12 Central London local authorities that make up Central London Forward group declined by £626 million in real terms between 2015/16 and 2021/22. That represents a reduction of 33 per cent, or around £200 per resident.
At the same time as funding was declining, demand for services was growing, driven by increases in London’s population and growing demand for social care. Given how reliant boroughs were on government grant funding, those reductions have put most of them in the invidious position of having to both reduce spending on local public services and increase Council Tax at the same time.
The pandemic has added to this pressure, producing huge increases in demand and a sudden decline in revenue. While the government has stepped in to cover much of the costs, many councils still face a gap. Estimates put the funding shortfall due to the pandemic at £500m across London as a whole.
Recent BBC analysis has shown that the impact of the pandemic on council finances is particularly acute in the capital. London councils face having to make further savings of £39 per capita this year – the largest figure of any region – compared to an average of just £30 across the UK.
The government is soon due to be concluding its Fair Funding Review of local government finance. We will then see a comprehensive spending review in the autumn, which will set out the national administration’s broader spending plans over the next three years. Alongside this, the government will be releasing a “levelling up” white paper, which will flesh out this flagship policy.
The government has said that levelling up is about “improv[ing] livelihoods and opportunity in all parts of the UK”. At the Renew London conference this week, Minister for London Paul Scully said that “levelling up” needs to happen across London too. But much of the rhetoric around this theme – and some of the actions so far – risk looking like the needs of London are being side-lined.
As London Councils has shown, the funding allocation for recent grant schemes, such as the Community Renewal Fund and the Levelling Up Fund, appear to disadvantage the capital. And there is pressure from some for the government to go further. The Northern Research Group, a group of Conservative MPs in “red wall” constituencies, this week called for a series of measures to accelerate the levelling up agenda, including “automatic grants to help deprived areas outside of London”.
Few would quibble over the need for greater investment in deprived areas elsewhere. But this should not be at the expense of investment in London’s deprived areas. After all, it is London which had the highest levels of poverty going into the pandemic, and it is London which has been hit hardest by the coronavirus jobs crisis. The capital has seen both the most jobs lost as a result of the pandemic, the highest levels of jobs still furloughed, the highest increase in unemployment, and the slowest recovery of any region.
If levelling up is about improving livelihoods and opportunities across all parts of the UK, then it must be about improving livelihoods and opportunities in the capital too. As part of the Fair Funding Review, the government should commit to ensuring no council sees a further decline in funding in real terms. Further reductions for London boroughs on top of the significant impact of the pandemic would lead to greater pressure on budgets, additional service cuts and further increases in Council Tax. Done in order to fund investment elsewhere would risk looking like levelling down in the capital.
Joe Dromey is Director of Central London Forward, a sub-regional partnership of 12 London local authorities: Camden, City of London Corporation, Hackney, Haringey, Islington, Kensington & Chelsea, Lambeth, Lewisham, Southwark, Tower Hamlets, Wandsworth and Westminster. Photograph: Monmouth Street, Seven Dials.
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