Peter John: London’s councils face special funding pressures, which national government must recognise

Since June, when I became chair of London Councils I have been working on new priorities for the work that we do. There are three aspects to our organisation. One is the work of being a lobbying organisation representing the 32 boroughs and the City of London. Another is our work with things like the Freedom Pass and the Taxicard. And then there’s the work that we do bringing boroughs together, demonstrating that collectively we are more than the sum of our parts. The challenge I’ve been working on with colleagues is how that additional value we create when we work together can really make a difference to our residents.

Over the next few days we are hoping to finalise what our priorities are and what targets to set for ourselves. It won’t be a surprise to learn that they focus on housing, on violent crime and on the need to secure the sorts of infrastructure the city needs. In many ways, those three things are linked. We know that problems experienced by so many of our residents with their housing affect other areas of their lives and we know that if we want to build the homes that both the government and we want built, you need the infrastructure to help deliver that.

We welcome the lifting of the HRA borrowing cap as an important first step in helping boroughs to play the part that we all believe we can in building the sorts of homes Londoners need for the future. I think there is unparalleled ambition among councils to become homebuilders again. On its own, however, it won’t be enough. We need to secure further freedoms and flexibilities, in particular over the use of right to buy receipts and greater certainty over rents.

A few years ago, all of us set housing policies on the basis of council rents rising with inflation at least, and then the chancellor of the time, George Osborne, upset all that by insisting on rents being cut by one per cent a year. Central government needs to learn when to keep its nose out of things that have an incredibly negative impact on our ambitions to deliver the housing London needs.

The scourge of serious violence has touched so many of our communities over this year. It is vital that we as councillors play our part alongside the Mayor, the Police and others in framing action at a pan London level and lead action at local level which is where the critical interventions will be made to reverse the trend that we are seeing.

Far too many of us have had to make really tough choices about some of the youth services that we know make a difference to the choices young people make, diverting them away from a life of criminality. Who can seriously argue that investing in children and youth services is not a contribution to combatting serious youth violence? In the same way, who can seriously argue that funding adult social care is not the most important way towards making health spending more sustainable in the medium term?

 I want to focus on arguing for the resource base for London’s public services in general and London local government in particular, from 2020 onwards. By this time next year, the government is likely to have completed a spending review which will set the overall funding envelope for local services and a fair funding review.

Both of those will determine the distribution of funding across the country. We firmly believe that local funding should be determined by population and deprivation. A key task for me, as chair of London Councils, is both to argue to maximise the overall pot for local government as a whole – this is not a case of London against the rest – but also ensuring that government recognises that London has particular needs and challenges which other part of the country do not face. 

By the end of the decade, London’s boroughs will have seen a cumulative cut of some £4 billion to our core funding from government. There has been a 63 per cent real terms reduction to core funding per capita across our boroughs since 2010. London’s boroughs need to make £2 billion worth of savings in the coming few years to balance our books unless there is a significant change.

At the same time, we are seeing huge demand pressures bearing down on our services. London’s population has grown by about 900,000 since 2010 – more than double the rate of the rest of England – but the funding formula means that less than half of that rise is accounted for in the money our councils receive. We are providing services to more than 500,000 people without a penny of additional funding. Think about that.

London has huge pressures in temporary accommodation and homelessness – increases of more than 50 per cent over the decade. Demand for supporting children in need and children with special education needs has swelled – the number of children with protection plans or education health and care plans have risen by 40% and 48% respectively. As a result our cumulative overspend is now greater than £200million across the boroughs in those two areas. This is a real and stark challenge.

We have launched a document called Investing in London’s Future, which sets out the case that London local government will make both as part of the spending review and the fair funding review over the next 9-12 months, setting out the specific challenges that London faces. Some other parts of the country are keen, on occasion, to portray London as basking in untold riches. But our streets are not paved with gold. Londoners, especially those on low incomes, spend far more of what money they have on housing than people in the rest of the country. As a result there are 2.4 million Londoners living in poverty after housing costs are taken into account, and 700,000 of those are children. Those are unacceptable figures.

It is critically important to say that a much wider reform is necessary to put the finances of local government on a more sustainable basis in the medium term. We cannot simply carry on using successive budgets to apply sticking plaster to local government finances. More local control over a broader range of taxes is required to give councils greater local autonomy. We are best place to take decisions about what our communities need. We should be empowered to be able to do so and so drive good and sustainable growth in our local communities. It is vital that national government recognises the difficulty of the position London has reached.

This article is a shortened and slightly edited version of the speech Peter John gave to the annual London Councils Summit, held yesterday at the Guildhall. As well as being chair of London Councils, Peter is leader of Southwark Council. Follow him on Twitter.