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Political reporter Paul Seddon reported that a record 29 English councils have been granted permission by the government to relax budgeting rules for the upcoming year to help them balance their books. These councils will have the flexibility to use Treasury loans or funds from selling assets to cover their day-to-day expenses, which is typically prohibited. This number is a significant increase from the 19 councils that requested similar flexibility in the previous year, highlighting the ongoing financial challenges faced by local authorities. While this measure aims to provide financial relief, councils are urged not to sell off important “community and heritage assets” to meet their current spending needs.
With a projected budget of £69.4bn allocated for next year, assuming a maximum allowed increase in council tax, English councils are still grappling with rising costs of mandatory services like adult social care and special educational needs. On Thursday, it was confirmed that 29 councils have requested additional financial support totaling £1.5bn to balance their budgets in the face of these challenges. Details about how each council plans to manage their finances will be disclosed at a later date through a series of capitalisation directions. Among the councils seeking assistance are those that have previously faced financial difficulties, including Birmingham, Croydon, and several others who have experienced financial strain in recent years.
Councils will have the option to utilize funds generated from selling assets such as land and buildings to cover their day-to-day expenditures, which is typically restricted to cost-saving projects. Additionally, they can utilize long-term investment loans backed by the Treasury to address their current spending needs. The government has eliminated a 1% surcharge on Treasury loans to facilitate this process, emphasizing a collaborative approach rather than punitive measures. This move aims to encourage asset sales over government lending and is viewed as a positive step by council leaders.
While the extra budget flexibility is considered a temporary solution by London Councils, concerns have been raised about the accumulation of long-term debts. The government, on the other hand, argues that changes such as the ability for councils to set multi-year budgets will ultimately lead to a more stable financial foundation. Furthermore, there are plans to introduce a more equitable funding system based on deprivation levels from 2026, aligning with a broader restructuring of council financing. However, potential political tensions may arise, especially among Conservative-run councils in rural areas, who may contest the fairness of the new funding formula
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