Havering (Parliament Politics Magazine) – Havering Council has received an £88m bailout from the government amid ongoing financial struggles, raising concerns over the borough’s economic stability.
Thirty authorities nationwide were given a “capitalization direction” in advance of the upcoming fiscal year, including the cash-strapped authority.
It will have a £71 million budget deficit going into 2025–2026, including the £32.5 million shortfall from the previous year.
The eight-figure loan would help handle the “worst case scenario,” according to council leader Ray Morgon.
The two strains on the council’s finances are social care and housing.
Last year, it paid exorbitant prices to house homeless families in bed-and-breakfasts or overnight hotels, overspending its housing budget by £6.1 million.
Havering has had to ask for “exceptional financial support” for the second consecutive year after receiving a £32.5 million loan to fund its 2024 budget.
Effectively, it will serve as a line of credit from which the council can draw when needed. Over the next 20 years, it will be repaid with interest.
Cllr Morgon added:
“We hope we don’t have to draw down the full amount and we will be doing all we can to squeeze further efficiencies and savings out.”
The council has acknowledged that it would have to cancel the entire loan from the previous year, despite the cautious optimism for the upcoming year.
The council controversially decided earlier this month to raise council tax by nearly 5% and close three libraries in the borough.
Given that Havering has reduced almost £160 million in the last 15 years, the amount of money that can be saved in the future is getting less.
In order to avert financial catastrophe, top council members had previously cautioned that “fundamental changes” to the government’s funding mechanism were required.
Speaking to reporters earlier this month, councillor Chris Wilkins, cabinet member for finance, said: “Unless there is a complete change of formula and the way the data is examined, I will be here next year saying the same thing.
We may not be asking for £70m or £80m – it could be up to £150m.”
He claimed that the lack of appropriate finance was the primary cause of councils’ reliance on loans throughout the United Kingdom.
About 80% of Havering’s budget is used to meet its legal responsibilities, which include housing, transportation, education, and adult and child social care.
There isn’t much left over for other initiatives, even if Havering London has managed to raise £1.6 million for its A Good Life cultural initiative.
A “landmark public event” will be held at Romford Market, a new heritage trail will be installed throughout the borough, and an archive devoted to club culture will be opened by the cultural and placemaking organization, which is partially under the council’s jurisdiction.
In addition, it will supervise the creation of a new artist studio, a program for skill development, and a network of community spaces for exhibitions.
After acquiring £1.6 million through funding from Arts Council England and the National Lottery Heritage Fund, the organization is now looking for an additional £800,000 in donations from the general public.
Dr David Shearing and Mathew Russell, directors of Havering London, said in a statement:
“The funding will enable a step change in cultural provision, ensuring the people of Havering can access and contribute to a thriving cultural life.”
How will Havering council use these initiatives to address challenges?
By helping to close the council’s financial deficit, the loan will guarantee the continuous provision of necessary services. This covers financing for housing, social services, and other essential public services.
The loan lowers the likelihood of service interruptions by stabilizing the council’s finances and enabling improved resource planning and management.
The council tax hike of up to 4.99% will raise more money to fund local services. This increase attempts to alleviate some of the council’s financial strains.
The increase is required to maintain service levels and solve the council’s financial gap, even though it raises homeowners’ bills.
The Havering Council is concentrating on digital transformation to lower expenses and increase the effectiveness of service delivery. The council can improve resource management by increasing online accessibility to services.