Councils to receive exceptional support

Councils that are in exceptional need of help are set to receive letters confirming government support to help balance their budgets.

30 councils have bee confirmed to receive support for the coming financial year to ensure delivery of vital public services, protecting vital community assets and promoting economic stability as committed to in the Plan for Change.

This is the first time additional expectations have been set out to protect treasured community assets, culture and identity, with councils using capitalisation instructed not to dispose of community and heritage assets.

Additional expectations have been set out to protect treasured community assets, culture and identity, with councils using capitalisation instructed not to dispose of community and heritage assets.

The Exceptional Financial Support process has been around since 2020 to support councils facing unmanageable financial pressures.

The support is provided through capitalisation, where the government permits councils to treat revenue costs as capital costs and means councils can meet those costs using their existing borrowing powers or via capital receipts. However, the government has now removed the condition that made borrowing more expensive through a 1% premium and will now work with councils on improvement and actions they can take to help manage their position to ensure value for taxpayer money.

In response to the announcement, London Councils has repeated its call for a sustainable solution to the crisis facing town hall budgets. The group as described Exceptional Financial Support as a 'misnomer' with increasing numbers of boroughs relying on the emergency borrowing in facilitates. London Councils has raised concerns that the scheme is burdening councils with further debts and servicing costs.

Seven London boroughs are to receive Exceptional Financial Support in 2025-26, total £418 million. This is an increase from two boroughs and £71 million in 2024-2025.

Cllr Claire Holland, Chair of London Councils, said: “Years of structural underfunding combined with fast-rising demand for services and skyrocketing costs have created a perfect storm for borough budgets. These figures show almost a quarter of town halls in London would face financial collapse without emergency borrowing.
     
"Exceptional 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 than resolve the crisis, EFS is a short-term measure that leaves us with more long-term debts to worry about.
     
“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.”