The London Borough of Havering was on the brink of financial collapse just weeks ago, but a loan of £54 million has now been accepted. With 26 councils in the UK teetering on the verge of bankruptcy, others won’t be so lucky.
Budget Approval Amid Crisis
Havering Council successfully signed off its budget after the government gifted them a crucial £54 million loan payment. The move follows weeks of dire warnings about the town hall’s perilous financial situation.
Havering Council’s Dire Financial Situation
At the beginning of the year, Havering Council, led by Ray Morgon, issued a stark warning, expressing the borough’s imminent bankruptcy within six weeks unless the government intervened.
Council’s Loan Request
The council applied for a £54 million loan that has now been granted from the Department for Levelling Up, Housing, and Communities to stabilize its budget and avoid financial collapse.
Council Leader’s Statement
Ray Morgon stressed the critical nature of the situation, stating that without government assistance, the town hall faced effective bankruptcy and a section 114 notice.
Warning of Bankruptcy
Morgan said, “We’ve applied to the Department for Levelling Up, Housing and Communities for a loan,” before warning, “If we don’t get that we’re basically bankrupt.”
Austerity Measures
Despite the financial injection, the Department for Levelling Up, Housing and Communities announced plans to implement austerity measures, including a maximum 4.99% increase in council tax from April.
People to Pick up the Pieces
The people of the Borough of Havering will now have to deal with the aftermath of these austerity measures despite already being in one of the highest bands of Council Tax in the country, paying an average of over £2000 a year.
Additional Funding for Social Care
Housing Secretary Michael Gove announced an additional £500 million allocation for children’s and adult social care in 2024/25 as many councils in the UK are facing debts over social care services.
London Council’s Face Bankruptcy
Havering is not the only council facing the risk of bankruptcy. 26 councils in the UK are teetering on the edge of financial collapse, including Woking, Thurrock, Slough and Croydon in the London area.
Financial Strain Across Local Authorities
Local authorities nationwide cite financial pressures due to escalating social care costs and increasing homelessness, with London boroughs, in particular, grappling with severe challenges.
Woking’s “Staggering” Debt
Woking announced a staggering loss of £1.2 billion in June 2023 due to investments in hotels and skyscrapers that caused “staggering” debt in the area, according to a Labour MP.
London Boroughs at the Epicenter
London boroughs, dealing with a homelessness rate of one in 50 residents, anticipate a continuing funding shortfall of at least £500 million in 2024/25.
Sigoma Reveals Nationwide Financial Strain
The Special Interest Group of Municipal Authorities (Sigoma), which represents 47 urban councils in northern England, the Midlands, and the south coast, confirmed that many more councils are on the brink across the country.
Nine Councils Under Sigoma to Declare Bankruptcy
Five of its members are considering issuing a notice of their inability to balance their annual budget for 2023-24, while nine others may have to declare effective bankruptcy next year.
Government Call to Action
Chair of Sigoma, Sir Stephen Houghton, urged the government to “recognize the significant inflationary pressures that local authorities have had to deal with in the last 12 months.”
Care Sector a Main Issue
According to Sir Stephen Houghton, who is also the Labour leader of Barnsley Council, put the financial strain in most councils mainly down to increasing demand for services, particularly in the care sector.”
Councils With “Nothing Left”
Houghton revealed that some councils have run out of funding for these sectors, “The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”
Havering Given Lifeline
Although Havering has been given a substantial financial loan to save it from bankruptcy, other councils across the UK are not so lucky, meaning it’s up to the government to decide the fate due to lack of funding over the last decade.
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