Councils across England struggling to balance their budgets will be granted additional financial flexibility under new measures designed to ensure vital local services can continue. The government has confirmed that a number of authorities will receive assistance through Exceptional Financial Support, subject to meeting strict conditions.
EFS allows eligible councils to use capital resources – including receipts from asset sales and borrowing – to fund day‑to‑day expenditure where they would otherwise be unable to set a balanced budget. The mechanism, introduced in 2020, aims to prevent financial failure while giving councils time to stabilise their finances.
The government says the need for some councils to request EFS reflects the challenges of an outdated funding system. As part of reforms to strengthen financial stability, ministers have announced £78 billion for local authorities in what is described as the first multi‑year funding settlement in over a decade.
This settlement uses a new evidence‑based approach, incorporating updated Indices of Multiple Deprivation, to better reflect local need and the real cost of delivering services in more deprived communities. The government says these changes mark a shift towards a more sustainable model, enabling councils to restore services and plan beyond year‑to‑year budgeting.
Councils receiving Exceptional Financial Support will be required to undergo a rigorous assessment of their financial position, governance and recovery plans. Conditions may cover:
- Financial management and spending controls
- Long‑term recovery and transformation plans
- Steps to deliver efficiencies
- Assurance that finances will be stabilised
Government departments may request additional information or engagement to ensure the council can return to a secure footing.
Greater financial stability is expected to allow councils to focus on the priorities that matter most to residents, including:
- High‑quality local services
- Support for vulnerable and deprived communities
- Better local outcomes through improved planning
Alison McGovern, Minister for Local Government and Homelessness, said:
“People in deprived areas have been let down for too long, with councils in the poorest areas left on their knees and services cut back as a result.
“The support we’re announcing is critical for the councils, and we are doing everything we can to ensure councils can balance the books, including by making £78 billion available through the first multi-year settlement in a decade.”
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