London's City Hall faces making £500m in cuts if government fails to support local authorities, Sadiq Khan warns

Mayor of London urges ministers to avoid 'a new era of austerity'

Mayor of London Sadiq Khan (AFP via Getty Images)

Sadiq Khan has warned that City Hall faces making up to £500m in cuts to public services if the government fails to provide financial support to local authorities.

The mayor of London pleaded with ministers to avoid "a new era of austerity" as he set out forecasts revealing the Greater London Authority (GLA) faced a budget shortfall of £493m over the next two years following the coronavirus crisis.

Without government support, Mr Khan said the axe would have to fall on funding for Transport for London, as well as frontline services such as the London Fire Brigade and the Metropolitan Police.

He 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 £493m 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."

Worst case scenario estimates suggest the capital faces 7 per cent losses in council tax revenues and reductions of 11 per cent in business rates by March 2022.

In this scenario, TfL will have to save £75.5m in 2020-21 and then £211.9m in 2021-22, while policing and crime could be hit by £45.5m in 2020-21 and then £63.8m the following year.

The London Fire Brigade faces cuts of £10m in 2020-21 and £15m in 2021-22, and the mayor's office will also have to save £27m in 2020-21, and £30m in 2021-22.

It comes after Mr Khan revealed he was planning to move the GLA and the Mayor's Office out of the City Hall building to east London's Royal Docks in order to plug the gaping hole in the capital's finances.

The London mayor launched a six-week consultation on the move, which would save an estimated £55 million over five years. He has also taken a 10 per cent pay cut.