London Councils calls for “sustainable solution” to funding crisis

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February 26, 2025
2 min read

London Councils calls for “sustainable solution” to funding crisis

With the government announcing its Exceptional Financial Support (EFS) for local authorities, London Councils has repeated its calls for a sustainable solution to the crisis affecting town hall budgets. The cross-party group has branded EFS a “misnomer” as an increasing number of boroughs rely on the emergency borrowing it facilitates.

There are “serious concerns,” it said, that EFS is “burdening councils with further debts and servicing costs – without enabling them to return their finances to a sustainable footing.”

The government has confirmed that seven boroughs in the capital will receive EFS in 2025-26 with a total of £418 million. That’s a significant jump from the two boroughs that received £71 million in EFS in 2024-25. 29 local authorities are confirmed to be eligible for EFS in 2025-26, up from 19 in 2024-25 and just eight in 2023-24.

In its submission to the Spending Review by the government, London Councils has highlighted the worsening pressure on borough finances. Its analysis has found boroughs in London are facing a funding gap of at least £500 million in the coming year (2025-26). Boroughs’ funding per Londoner fell by 28% since 2010, it found, despite an increase in demand for services which are found to be more costly to provide.

The EFS framework was put in place in 2020 to enable councils to take out emergency loans from the Public Works Loan Board in order to address their immediate financial pressures. Without it, more councils may have to issue Section 114 notices due to being unable to balance their budgets. A local authority Section 151 officer (Finance Director) would have a duty to issue a Section 114 notice if they believe that the local authority is unable or unlikely to be able to balance its budget.

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