Exceptional Financial Support Granted to English Councils Amid Growing Fiscal Pressures
A record 30 local authorities in England receive financial assistance to avoid bankruptcy as they face serious budget deficits.
In an unprecedented move, 30 English local authorities have been authorized to borrow funds to avert bankruptcy, amid recommendations from government ministers to refrain from selling valued local assets, including historic sites and recreational areas.
The councils, experiencing what has been described as ‘unmanageable’ financial pressures, were collectively approved to borrow a total of £1.5 billion to address significant budget shortfalls stemming from chronic underfunding and increasing demands for social care and other essential services.
Among the councils, Birmingham, Bradford, and Windsor and Maidenhead are poised to borrow over £100 million this fiscal year to maintain operations, with the additional ability to implement council tax increases of up to 10%, which exceed previously established limits.
Six councils, specifically Birmingham, Croydon, Nottingham, Slough, Thurrock, and Woking, are currently under special measures following recent bankruptcies and have been granted further financial aid.
The exceptional financial support (EFS) arrangements allow these councils to access capital loans for revenue expenses, with future plans to offset their debts through the sale of assets and reductions in frontline services.
For the first time, the government has set conditions preventing councils receiving EFS from liquidating what it terms ‘community and heritage assets,’ citing concerns that these measures could lead to the hasty disposal of beloved local parks, golf courses, and cultural collections.
Councils newly benefitting from special borrowing packages include Newham, Shropshire, Swindon, Trafford, West Berkshire, Wirral, Enfield, Halton, Barnet, Solihull, Worcestershire, and Worthing.
The number of London boroughs receiving EFS assistance has increased significantly, rising from two to seven, indicating that nearly a quarter of town halls in the capital face potential financial collapse without this emergency borrowing.
Jim McMahon, the Minister for Local Government, acknowledged the precarious state of council finances and reiterated the government’s intent to assist councils toward recovery and improved public services.
A spokesperson from the Ministry of Housing, Communities and Local Government highlighted that while reforming council financing is a priority, it will require time, indicating possible ongoing instability in the local government sector for the foreseeable future.
One notable application for EFS support came from Hampshire County Council, which sought to implement a 15% council tax increase over the next two years, but this request was turned down by the government.
The dramatic rise in EFS packages represents a 50% increase from the previous year, reflecting the worsening financial health of municipal authorities across England, regardless of their political affiliations or geographic locations.
Notably, the current council financial statements do not encompass escalating deficits related to special educational needs, which are presently managed under special accounting regulations set to expire in just over a year.
Introduced in 2021, the EFS program began as a lifeline for councils that had sought assistance after declaring bankruptcy due to high-risk property investments.
However, the majority of councils now receiving EFS are regarded as otherwise well-managed entities grappling with systemic underfunding, surging inflation, and heightened demands for essential services such as adult social care and homelessness support.
Critics contend that the EFS approach undermines sound accounting practices and represents a temporary solution that postpones inevitable insolvencies by encumbering councils with additional debt.
Observers express skepticism regarding the Labour party’s strategy to reform local government financing, especially without alterations to the existing council tax framework.
The councils, experiencing what has been described as ‘unmanageable’ financial pressures, were collectively approved to borrow a total of £1.5 billion to address significant budget shortfalls stemming from chronic underfunding and increasing demands for social care and other essential services.
Among the councils, Birmingham, Bradford, and Windsor and Maidenhead are poised to borrow over £100 million this fiscal year to maintain operations, with the additional ability to implement council tax increases of up to 10%, which exceed previously established limits.
Six councils, specifically Birmingham, Croydon, Nottingham, Slough, Thurrock, and Woking, are currently under special measures following recent bankruptcies and have been granted further financial aid.
The exceptional financial support (EFS) arrangements allow these councils to access capital loans for revenue expenses, with future plans to offset their debts through the sale of assets and reductions in frontline services.
For the first time, the government has set conditions preventing councils receiving EFS from liquidating what it terms ‘community and heritage assets,’ citing concerns that these measures could lead to the hasty disposal of beloved local parks, golf courses, and cultural collections.
Councils newly benefitting from special borrowing packages include Newham, Shropshire, Swindon, Trafford, West Berkshire, Wirral, Enfield, Halton, Barnet, Solihull, Worcestershire, and Worthing.
The number of London boroughs receiving EFS assistance has increased significantly, rising from two to seven, indicating that nearly a quarter of town halls in the capital face potential financial collapse without this emergency borrowing.
Jim McMahon, the Minister for Local Government, acknowledged the precarious state of council finances and reiterated the government’s intent to assist councils toward recovery and improved public services.
A spokesperson from the Ministry of Housing, Communities and Local Government highlighted that while reforming council financing is a priority, it will require time, indicating possible ongoing instability in the local government sector for the foreseeable future.
One notable application for EFS support came from Hampshire County Council, which sought to implement a 15% council tax increase over the next two years, but this request was turned down by the government.
The dramatic rise in EFS packages represents a 50% increase from the previous year, reflecting the worsening financial health of municipal authorities across England, regardless of their political affiliations or geographic locations.
Notably, the current council financial statements do not encompass escalating deficits related to special educational needs, which are presently managed under special accounting regulations set to expire in just over a year.
Introduced in 2021, the EFS program began as a lifeline for councils that had sought assistance after declaring bankruptcy due to high-risk property investments.
However, the majority of councils now receiving EFS are regarded as otherwise well-managed entities grappling with systemic underfunding, surging inflation, and heightened demands for essential services such as adult social care and homelessness support.
Critics contend that the EFS approach undermines sound accounting practices and represents a temporary solution that postpones inevitable insolvencies by encumbering councils with additional debt.
Observers express skepticism regarding the Labour party’s strategy to reform local government financing, especially without alterations to the existing council tax framework.
