Following the announcement from the UK Government, industry experts have called the decision a failure and a mere ‘short-term’ fix.
Towards the end of last week the Government revealed 30 English councils have been granted exceptional financial support (EFS) packages, which have otherwise been referred to as ‘bailouts’, enabling them to borrow money to avoid bankruptcy. Collectively, the local authorities can pick from a pot worth £1.5bn to stop them from having to sell off local assets in a bid to plug funding gaps.
Image: Birmingham is one of the local authorities that’s been granted EFS.
Of the 30 councils, Birmingham, Bradford and Windsor and Maidenhead have been given the green light to borrow more than £100m this year, as a result of being in a worse financial position. What’s more, the local authorities have also been given permission to issue council tax bill increases of up to 10%.
Against this backdrop, Birmingham, Croydon, Nottingham, Slough, Thurrock and Woking have also been granted special financial help due to them being in special measures after declaring bankruptcy in recent years.
In contrast, Newham, Shropshire, Swindon, Trafford, West Berkshire, Wirral, Enfield, Halton, Barnet, Solihull, Worcestershire and worthing have been granted special borrowing packages for the first time.
When announcing the news, Jim McHahon, the minister for local government, said: ‘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.
‘We are working with local leaders, encouraging councils to come in confidence where needed to seek help and be assured we will offer a relationship of partnership – not punishment – in our joint mission to improve public services for communities and create economic stability.’
However, not all industry experts believe granting additional EFS support – which was first introduced in 2020 – was the right decision. Research from London Councils show the method is no longer ‘exceptional’ as seven London boroughs will receive EFS in 2025/26 – a significant jump from the two boroughs receiving it during 2024/25.
‘Years of structural underfunding combined with fast-rising demand for services and skyrocketing costs have created a perfect storm for borough budgets,’ Cllr Claire Holland, chair of London Councils said. ‘These figures show almost a quarter of town halls in London would have financial collapse without emergency borrowing.’
‘Expectational financial support is a misnomer – it is no longer exceptional, and it fails to provide sustainable financial support, instead forcing local authorities to borrow to maintain basic statutory services. Rather tha. Resolve the crisis EFS is a short-term measure that leaves us with more long-term debts to worry about,’ she continued.
‘We desperately need a sustainable solution to the crisis in local government finance, which has been years in the making. We welcome the government’s commitment to working with local authorities to reform a funding system which is fundamentally broken and to bring long-term stability to council finances. London boroughs will be making the case for restoring overall funding to 2010 levels and ensuring it is distributed in a way which meets local need, alongside other crucial interventions to stabilise budgets and avoid further cutbacks to local services.’
Photo by Ethan Thompson via UnSplash
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