The soaring cost of accommodation for growing numbers of homeless people, combined with 14 years of austerity, is a major factor in Lambeth council facing a £70m deficit over the next four years.
The council warned that such factors will force it to consider “even more drastic savings in other services, services that many people value and rely on”.
In a submission to chancellor Rachel Reeves, the council said her 30 October budget will come at a time “that could not be more critical” for councils struggling with overwhelming financial pressures.
The number of families housed in temporary accommodation by Lambeth council has risen to 4,600 – an increase of 1,300 in just two years.
The council says that this means it increasingly has to rely on expensive “nightly paid” accommodation, pushing its bill for temporary accommodation up to at least £28m this year.
Lambeth council’s “budget representation” to the chancellor also warns that: “Government cuts and failed policy in recent years have taken £500m out of the housing revenue account, limiting our potential to provide fit-for-purpose homes.”
The submission asks for three specific changes that would give councils “the necessary flexibility, powers and freedom” to drive improvement and focus their efforts and resources where they are most needed:
- Address the “demand crisis” confronting Lambeth and local government more widely
- Fix the local government financial system to provide fairer funding based on need
- Empower Lambeth and local government generally to drive change.
Council leader Claire Holland said: “Lambeth’s core spending power in real terms has reduced significantly since 2010, despite population increases, rising demand for social services and increased responsibilities from central government.
“Looking ahead over the lifetime of this parliament, current levels of public spending plans, combined with inflation and huge demands for services like temporary accommodation, mean we face a funding pressure of around £70m deficit across the next four years.”
Cllr Holland said the government “must provide urgent support to enable local government, including Lambeth council, to manage the immediate crises impacting the sector, to ensure councils can continue to provide vital support to those most vulnerable and confirm their long-term financial sustainability.”
She said Lambeth – and all local councils – are ready to support the new government’s “five missions” (to kickstart economic growth, make Britain a clean energy superpower, take back our streets, break down barriers to opportunity, and build an NHS fit for the future).
She added: “The missions are reliant on a strong local government at their heart, empowered to deliver the improvements to make their ambitions a reality.”
Chancellor Reeves announced that her first budget “will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax”.
Lambeth’s submission to the Treasury says the budget must signal changing of the system of funding councils, to one based on the needs of local communities.
“Following more than a decade of chronic underfunding, local government is facing several simultaneous urgent and debilitating crises which threaten the future of the sector and our communities,” the council said.
“Recent analysis by the Local Government Association has estimated a staggering £2.3 billion budget gap in the sector in 2025/26, with the gap estimated at £700m across London borough councils alone.
“These numbers are largely driven by factors out of local government control, including huge increases in demand for social care and housing when costs have surged due to inflation.”
In Lambeth, the 42nd most deprived council area in the country, high demand for key services including social care and housing has seen the bill for children’s social care increase by £12.4m in 2023/24.
The council is asking for an emergency 7% increase in core spending in real terms across local government “to combat the immediate impacts of these crises” – plus “immediate consideration of support to those councils most impacted by rising temporary accommodation costs”.
Cllr Holland said: “The housing crisis is a tragedy for so many families in Lambeth who deserve a permanent home. Sadly, the scale of the demand in boroughs like Lambeth makes that impossible for many.
“It isn’t sustainable for those families, or for councils like Lambeth, for this huge demand to fall on a small number of local areas and we need a national solution to this crisis that supports families and puts councils on a sustainable footing.
“Without action in the budget, the scale of our overspend in temporary accommodation means we’ll need to consider even more drastic savings in other services, services that many people value and rely on.”
