Thirty councils to receive Exceptional Financial Support in 2025-26

The Government has agreed in principle to provide Exceptional Financial Support In the financial year 2025-26 to 30 councils who made a request for financial assistance "to handle pressures that they considered unmanageable and to enable them to set balanced budgets".

The list of councils and the amounts to be provided can be found here.

For eight councils this included agreement to support for prior years.

The Ministry of Housing, Communities and Local Government (MHCLG) said the support was “provided on an exceptional basis, and where relevant, on the condition that a local authority may be subject to an external assurance review”.

The Ministry has also directed that as part of this support package, for 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.

Minister of State for Local Government and English Devolution, Jim McMahon 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 as set out in our Plan for Change.”

The MHCLG said that in line with the previous government’s approach, support is provided through a financial flexibility, known as 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, unlike previous years, where local leaders deem it necessary to borrow to support recovery, the Government has removed the condition that made borrowing more expensive through a 1% premium. The Government will instead work with councils on improvement and actions they can take to help manage their position to ensure value for taxpayer money," it added.

Responding to the announcement, 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."

Cllr Holland added: “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.”