London's local authorities have said the government's plans to devolve more powers and resources to the capital could unlock significant opportunities for growth, housing delivery and public service reform. However, borough leaders have also warned that mounting financial pressures risk undermining their ability to deliver on these ambitions.
In its submission ahead of the Autumn Budget, London Councils has urged ministers to provide greater fiscal autonomy to the capital, arguing that stronger local control over funding would enable boroughs to accelerate progress on housing, employment and economic growth.
The cross-party organisation says London boroughs share many of the government's priorities, including increasing council housebuilding, helping more residents into employment and driving economic growth across every community in the capital.
At the same time, London Councils has highlighted what it describes as a worsening financial outlook for local government. Its latest analysis forecasts a funding gap of almost £1.2 billion across London boroughs during the 2026/27 financial year, rising to a cumulative shortfall of £5.2 billion by 2030.
Nine of London's 33 local authorities are currently reliant on the government's Exceptional Financial Support (EFS) scheme, which provides emergency borrowing to councils struggling to balance their budgets.
Cllr Stephen Cowan, Chair of London Councils, said:
"The government’s devolution agenda offers exciting opportunities for the capital."
"London is a leading global city and the powerhouse of the UK economy, but granting London more autonomy is critical to sustaining this success.
"Strengthening London boroughs by devolving new fiscal resources would put us in a much stronger position to tackle London’s challenges, grow the economy, and maximise London’s contribution to the public coffers. The benefits would be felt not only by Londoners but by communities around the country.
"Boroughs have a vital role to play, but are too often held back by enormous budget pressures. As we plan how best to invest in local services, to build housing, and to grow our economies, a worsening funding gap looms large over everything we do. For too long, the funding available to us has failed to keep pace with skyrocketing costs and demand for services.
"Everyone knows the local government finance system is broken. The upcoming Budget is an opportunity to help stabilise town hall finances, give boroughs more fiscal tools, and support the local delivery we all want to see."
London Councils argues that any future fiscal devolution settlement should involve both the Mayor of London and the capital's boroughs. Among its proposals are allowing councils to retain and influence the distribution of at least 50% of revenue generated by a visitor levy, retaining a greater share of business rates growth and ensuring councils play a role in any future devolved income tax arrangements.
Housing Crisis Continues to Impact Borough Budgets
Housing remains one of the biggest challenges facing London local government. Borough leaders say they are committed to delivering the largest council housing programme since the post-war era, but are seeking further government investment to make this possible.
The pressure is particularly acute in homelessness services. London Councils says one in every 50 Londoners is currently homeless and living in temporary accommodation. Boroughs collectively spend around £5.5 million every day on homelessness support.
To address rising costs, the organisation is calling for changes to Local Housing Allowance (LHA) arrangements, including ending the temporary accommodation subsidy gap and increasing LHA rates to the 30th percentile of local market rents.
Employment and Skills Funding Under Spotlight
London boroughs are also seeking greater control over employment and skills funding.
With almost 1.3 million economically inactive residents across the capital, London Councils wants the government to create a single, multi-year funding settlement for skills and employment support programmes that would be jointly designed by boroughs and the Greater London Authority (GLA).
The organisation is further calling for continued funding for London's five Get Britain Working Trailblazer programmes, which supported more than 6,000 Londoners during their first year of operation.
Transport Infrastructure Priorities
On infrastructure, borough leaders have identified the Bakerloo line extension and the West London Orbital railway as key projects needed to unlock future growth.
London Councils is also advocating for powers that would allow the capital to retain more of the land value uplift generated by major infrastructure schemes. The organisation argues this would provide additional resources for future investment and support long-term economic growth.
Funding Pressures Worsening
According to London Councils, the projected £5.2 billion funding gap represents a significant deterioration from previous forecasts.
The organisation identified a £4.7 billion shortfall in October 2025, which itself had more than doubled from the £2.2 billion forecast a year earlier.
Rising demand for statutory services including adult social care, children's social care, homelessness support and special educational needs and disabilities (SEND) provision continues to place growing pressure on local authority finances.
Because councils are legally required to set balanced budgets, boroughs will need to identify savings, draw on reserves or seek additional support if funding levels do not keep pace with demand.
London Councils also notes that while the 2025 Fair Funding Review increased resources for some boroughs, London's overall share of national local government funding fell. Adjusted for inflation, per capita funding in London is expected to be almost 17% lower in 2028 than it was in 2010.
Concerns Over Exceptional Financial Support Reliance
The growing reliance on Exceptional Financial Support remains a major concern for borough leaders.
London accounts for more than a third of the £1.5 billion distributed through the EFS scheme across England, despite representing only part of the national local government sector.
The scheme, introduced in 2020, allows councils facing severe financial difficulties to access emergency loans through the Public Works Loan Board.
London Councils has argued that EFS is increasingly becoming a core feature of council finance rather than an exceptional measure, warning that additional borrowing may simply increase long-term debt burdens without addressing underlying financial challenges.
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