Ministers grant extra financial help to four councils

The government has relaxed normal borrowing rules for four local authorities in a bid to ease their financial pressures.

The Ministry of Housing, Communities and Local Government (MHCLG) announced yesterday (10 February) that it was awarding capitalisation directions to Bexley, Eastbourne, Luton and Peterborough councils to help balance their books.

Capitalisation directions can be issued in special circumstances to allow local authorities to borrow in order to fund revenue costs.

The London borough of Bexley received the smallest amount – a capitalisation direction which will allow it to borrow up to £3.87m, Eastbourne Borough Council got £6.8m, Peterborough City Council received £4.8m and Luton Council received one for up to £35m.

Speaking in parliament yesterday, housing secretary Robert Jenrick said a ‘handful of councils face serious financial challenges’.

‘Some, it has to be said, due to very poor management, but others due to the exceptional events of the past year,’ he added.

‘There is quite a broad range, and today we are publishing details of the targeted support that we are providing to four councils unable to balance their budgets without some additional recourse to government.’

It comes after MPs heard earlier this week from a leading finance expert, who claimed 12 councils were in discussions with the government about extra help to balance their finances.

The leader of Luton Council, Cllr Hazel Simmons said: ‘I welcome the exceptional financial support that the government has agreed to provide to Luton Council which recognises the catastrophic impact of covid-19 on our airport.

‘The government’s directive will allow the council to borrow up to £35m to fund services this year, which is normally not permitted because of the statutory requirement to set a balanced annual budget.’

The leader of Peterborough City Council, Cllr John Holdich added: ‘In allowing us a capitalisation direction, they are acknowledging that the council has done everything it can to deliver much-needed services efficiently. This includes the implementation of a financial recovery programme and an extensive review of our services and contracts to ensure they are achieving best value.

‘It’s clear that they understand Peterborough’s unique challenges and have trust in our assessment of our position and our ability to run an effective council.’

Photo Credit – Derwiki (Pixabay)