London Mayor sets out plan to deliver £500m savings

The Mayor of London, Sadiq Khan, has pledged to do everything possible to protect frontline emergency services as he set out how the Greater London Authority Group (GLA) would look to make savings of up to £500m.

The savings will be needed if ministers fail urgently to support local and regional authorities across England in the aftermath of Covid-19.

The Prime Minister has repeatedly promised that there will be no new era of austerity in the wake of the coronavirus crisis. However, Ministers have so far refused to provide additional funding to local and regional authorities across the UK to compensate for lost funding.

Last week, the Mayor revealed that the GLA Group faces a forecast £493m budget shortfall over the next two years as a result of an unprecedented loss of business rates and council tax income, caused by Covid-19.

Sadiq warned that, unless the Government urgently comes forward with a significant financial package, he will be left with no choice other than to make significant cuts across all Mayoral organisations. These cuts would cause damage to public services and significantly hamper London’s ability to drive the economic recovery that is desperately needed.

The Mayor has published his Budget Guidance, which provides a breakdown of the savings that will be required across the GLA Group over the next two years if Ministers fail to act. A number of different scenarios are set out, with savings targets given for each organisation: The Greater London Authority (including the separate budget for the London Assembly), London Fire Commissioner, London Legacy Development Corporation, Mayor’s Office for Policing and Crime (including the Metropolitan Police Service), Old Oak and Park Royal Development Corporation and Transport for London.

Based on the current ‘reasonable worst-case’ estimate of 7 per cent losses in council tax revenues and reductions of 11 per cent in business rates income by March 2022, TfL will have to save £75.5m in 2020-21 and then £211.9m in 2021-22, as its contribution to the total £493m savings required.

The figures show a higher savings level for 2021-22 as it assumes that the Government’s 100 per cent business rates relief scheme for the retail, leisure, hospitality and nurseries sectors will end on 31 March 2021.

The London Fire brigade and Metropolitan Police Service face the smallest percentage reductions because of their critical public safety roles and the cuts they have faced over the last decade.

Government cuts have already forced the Met to make £850m of savings since 2010 and, under the previous Mayor, the London Fire Brigade made £100m of savings and closed 10 fire stations.

Based on the current ‘reasonable worst-case’ estimateMOPAC will have to save £45.5m in 2020-21 and then £63.8m in 2021-22, as its contribution to the total £493m savings required. For LFB it will be £10m in 2020-21 and £15m in 2021-22. The GLA (Mayor) will also have to save £27m in 2020-21, and £30m in 2021-22.

The fall in tax income is set to continue for a number of years, and there is a further risk from Government changes to the business rates system that would disadvantage Londoners further. This is in addition to the Met Police still not being properly funded by the Government for the true costs of policing our capital city.

Recognising future uncertainties in business rates income, the Mayor has already prudently established a reserve of £118.6m to ensure the 1,000 additional police officers he funded remained affordable. Today the Mayor has tasked City Hall officials to work on a plan on how his reserves could be used to help protect frontline policing services now and in the years ahead. This includes the Met’s future recruitment plans following the news that the Met has already reached the Home Office’s police officer recruitment target of 32,400 for this financial year.

Transport for London is due to receive more than £3.8bn in business rates over the next two years, over three-quarters of the amount the Mayor previously expected to receive. Given the scale of the funding gap, there would be no alternative but to reduce the money allocated to TfL.

The proportionate loss in TfL’s business rates income next year could be £211m. This is around half the total budget of London Fire Brigade, and nearly twice the proposed total funding for the Greater London Authority.  The Mayor proposes to take a proportionate approach, with TfL’s income falling by the same percentage as the overall fall in business rates income.

The Mayor of London, Sadiq Khan, said: “Ministers have repeatedly promised that there will be no new era of austerity as a result of Covid-19. We need the Government to act right now to keep that promise and provide financial support to local and regional authorities across the UK.

“A new era of austerity will not just damage public services – but will strangle the economic recovery that we desperately need to see in order to protect as many jobs as possible.

“The GLA Group could lose £493 million of business rates and council tax income over the next two years which would require significant cuts across the board. While I have prudently put aside significant sums to meet unexpected risks, the scale of the challenge is far beyond anything that any local or regional authority could have prepared for.

“I will do everything I possibly can to support the vital services that Londoners rely upon. That is why I have already proposed to save £55m by relocating City Hall and am taking a 10 per cent pay cut in solidarity with frontline workers and all those affected by the pandemic.

“My first priority is to protect frontline emergency services – which is why we have outlined proportionately smaller savings for the police and fire brigade – and why I am looking at how the reserves I’ve prudently built-up could be used to protect frontline policing services.

“I ask all Londoners to join me in calling on the Government to do the right thing and keep its promise.”

  • TfL have seen an unprecedented drop off in fare revenues since March, already costing an estimated £608M since then. Up until that point TfL had reduced its net cost of operations deficit by 71 per cent to £400m and increased its cash balances by 16 per cent to just over £2bn. It had also become more efficient, removing almost £1bn in costs during the last four years – before inflation and increased costs for new services.

Photo credit: Transport for London