UK Government Provides Financial Support to Struggling Councils
Thirty councils facing financial hardship to receive additional funding amid local government finance reforms.
The Government of the United Kingdom has announced that thirty councils experiencing exceptional financial difficulties will receive enhanced support aimed at protecting local services and ensuring their sustainability.
This announcement, made public on Thursday, introduces a process known as 'capitalisation,' which allows councils to borrow funds or liquidate assets to cover day-to-day operational expenses.
However, for the first time, councils have been instructed not to sell off community and heritage assets as a means of financial balancing.
The Ministry of Housing, Communities and Local Government (MHCLG) indicated that a record number of councils have sought exceptional financial assistance this year, surpassing requests since the capitalisation process was initiated in 2020. In a notable adjustment, the Government has removed a previous 1% premium applied to borrowing from the Public Works Loan Board.
Local government minister Jim McMahon emphasized the Government's recognition of the precarious state of council finances, reiterating a commitment to assist councils in achieving fiscal stability.
The MHCLG has expressed its intention to collaborate with local authorities on strategies for managing their financial situations more effectively, fostering a partnership approach rather than punitive measures.
He stated, 'We are under no illusion of the state of council finances and have been clear from the outset on our commitment to get councils back on their feet and rebuild the foundation of local government.'
Despite the increase in accessible funds, the MHCLG highlighted that such allowances are granted only on an exceptional basis.
Not all requests for financial support have been approved in full, and additional capitalisation increases have been authorized primarily for councils with lower existing council tax levels compared to their peers.
In parallel, the Government has initiated consultations regarding reforms to local government funding.
These proposed changes aim to redistribute resources more equitably among councils based on updated assessments of needs, facilitating the delivery of high-quality services across communities.
Furthermore, the Government has pledged to establish the first multi-year financial settlements for local authorities in a decade, which will be introduced in the 2026-27 fiscal year to provide budgetary certainty.
Analysis shows that a significant majority of councils are poised to implement council tax increases, with approximately 85% of 139 top-tier authorities in England indicating they will propose a rise close to the 4.99% threshold, which ordinarily would necessitate a local referendum.
For the 2025-26 local government finance settlement, the Government allocated over £69 billion, reflecting a 6.8% increase in councils’ Core Spending Power compared to the previous year.
A detailed list of the councils receiving exceptional support, along with the funding amounts allocated for 2025-26 and prior years, has been released, specifying allocations to individual councils including Birmingham, Bradford, Croydon, and others.
This announcement, made public on Thursday, introduces a process known as 'capitalisation,' which allows councils to borrow funds or liquidate assets to cover day-to-day operational expenses.
However, for the first time, councils have been instructed not to sell off community and heritage assets as a means of financial balancing.
The Ministry of Housing, Communities and Local Government (MHCLG) indicated that a record number of councils have sought exceptional financial assistance this year, surpassing requests since the capitalisation process was initiated in 2020. In a notable adjustment, the Government has removed a previous 1% premium applied to borrowing from the Public Works Loan Board.
Local government minister Jim McMahon emphasized the Government's recognition of the precarious state of council finances, reiterating a commitment to assist councils in achieving fiscal stability.
The MHCLG has expressed its intention to collaborate with local authorities on strategies for managing their financial situations more effectively, fostering a partnership approach rather than punitive measures.
He stated, 'We are under no illusion of the state of council finances and have been clear from the outset on our commitment to get councils back on their feet and rebuild the foundation of local government.'
Despite the increase in accessible funds, the MHCLG highlighted that such allowances are granted only on an exceptional basis.
Not all requests for financial support have been approved in full, and additional capitalisation increases have been authorized primarily for councils with lower existing council tax levels compared to their peers.
In parallel, the Government has initiated consultations regarding reforms to local government funding.
These proposed changes aim to redistribute resources more equitably among councils based on updated assessments of needs, facilitating the delivery of high-quality services across communities.
Furthermore, the Government has pledged to establish the first multi-year financial settlements for local authorities in a decade, which will be introduced in the 2026-27 fiscal year to provide budgetary certainty.
Analysis shows that a significant majority of councils are poised to implement council tax increases, with approximately 85% of 139 top-tier authorities in England indicating they will propose a rise close to the 4.99% threshold, which ordinarily would necessitate a local referendum.
For the 2025-26 local government finance settlement, the Government allocated over £69 billion, reflecting a 6.8% increase in councils’ Core Spending Power compared to the previous year.
A detailed list of the councils receiving exceptional support, along with the funding amounts allocated for 2025-26 and prior years, has been released, specifying allocations to individual councils including Birmingham, Bradford, Croydon, and others.
