Havering (Parliament Politics Magazine) – Havering Council calls for “fundamental changes” to local government funding. It warns of long-term financial risks without urgent reforms to the system.
The East London Authority will have a record-breaking £71 million budget deficit going into the 2025–2026 fiscal year, which includes the £32.5 million deficit from the previous year.
Havering has reduced its services by about £160 million over the last 15 years, so the amount of money that may be saved is getting smaller.
Speaking to reporters yesterday, councillor Chris Wilkins, the cabinet member for finance, said:
“Unless there is a complete change of formula and the way the data is examined, I will be here saying the same thing.
We may not be asking for £70m or £80m – it could be up to £150m.
We are expected to take out a loan, which our residents will have to pay – but we’re taking a loan out because we’re not getting the right grant funding.”
How will Havering Council address its financial crisis and rising costs?
The government’s current funding methodology, which evaluates councils’ needs, is based on 2011 census data.
The Ministry of Housing, Communities, and Local Government has been lobbied by Havering council members, who have repeatedly referred to the strategy as “outdated.”
Havering was given £40 million for the upcoming year in December, but it now claims that in order to avoid going bankrupt this year, it will need to borrow up to £90 million from the federal government.
Known as a “capitalization direction,” the loan will be repaid over the course of the following 20 years, plus interest.
The legislation mandates that councils provide a number of services, including education, social care for adults and children, and housing.
Currently, Havering spends over 80% of its budget on these required services due to rising expenses, which restricts what it can do. In an attempt to conserve money, the council controversially decided earlier this month to close three of the borough’s libraries.
Additionally, the government allocated the first-ever emergency recovery fund of £600 million to councils nationwide.
However Havering didn’t get a dime, which Kathy Freeman, the finance director, called “disappointing.” It depended on the degree of “deprivation,” which, according to her, did not correspond to the degree of need.
Senior council members said they are reluctant to raise the council tax even though the cabinet has agreed to raise it by 4.99%, the highest amount permitted without a public referendum.
Cllr Wilkins told reporters: “As a cabinet, we are in agreement we do not want to put our council tax up [past 4.99%].”
Havering now has the fifth-highest council tax rate in all of London. The borough’s average band-D home paid £2,208 last year, while nearby Redbridge and Barking & Dagenham paid £2,089 and £2,003, respectively.
The cabinet approved proposals to raise council tax by 2.99% during a meeting on February 5th, with an additional 2% going into adult social care.
At the end of this month, a full council meeting will be held to make the final decision.
He said:
“This hasn’t happened overnight. The current financial situation has developed over a number of years.
The increased demand, unit cost and complexity of the people we look after in social services has gotten much more difficult over the last five years.”
Will Havering’s housing crisis and financial strain lead to cuts?
Families are frequently accommodated in hotels or bed & breakfasts because there are not enough homes available around the borough.
These nightly schemes are quite expensive for Havering, which spent £6.1 million too much on housing last year.
Government funds account for 22% of local authorities’ funding, council taxes for 52%, and business rates for 27%.
19 local authorities required bailouts last year, compared to just eleven the year before. As additional authorities deal with housing and social care issues this year, that number is predicted to rise to as high as 50.
Councils cannot declare themselves commercially bankrupt; instead, they must declare that their revenue will not cover their expenses by issuing a Section 114 notice.
After that, Whitehall names commissioners to take over town hall and eliminate any unnecessary spending.
The government has not yet confirmed that Havering will be able to borrow the eight-figure amount.
Any modifications to the council tax will take effect on April 1st.