Nineteen councils have been given “Exceptional Financial Support” for the next financial year, 2024/25 and 8 for this financial year, 2023/4. The term “support” sounds like like government money, but in fact it is merely permission to borrow or to sell off assets.
This may stave off councils issuing section 114 notices until after the General Election – the main consideration for the government – however, that 19 have been granted permission for 2024/25 is a reflection of the scale of the problem.
The Special Interest Group of Municipal Authorities (Sigoma), which represents 48 urban councils, told the Financial Times that five of its members had applied for EFS. However, it added, the likely response from government would simply bounce the crisis into future years. Stephen Houghton, chair of Sigoma and leader of Barnsley council, said:
“The sale of capital assets to pay for day-to-day spending is not sustainable and is in many ways a bridging loan that will pass the costs to future taxpayers and defer problems of underfunding and growing funding gaps to future years.”
In a survey by the Local Government Information Unit, around half of councils said they could declare ‘bankruptcy’ (issue a section 114 notice indicating that they can’t balance their books) at some stage in the next Parliament.
As a council housing campaign we are conscious of the fact that councils that issue a section 114 notice are likely to place council housing at the back of the queue since it is not a ‘statutory duty’.
This news today underlines the relevance of our Open Letter on resolving the local government and housing crises.
When Labour is most likely elected into government later this year it will be faced with dealing with the unprecedented local government crisis and the acute housing crisis. If it sticks to Tory spending plans, which appears to be Rachel Reeves position, then these crises will worsen.
One of the key drivers of the financial crisis of many councils is the growing gap between the actual costs of providing temporary accommodation and the funding they receive. For households put into the private sector councils only receive the 2011 rate for Local Housing Allowance.
After increasing LHA in this forthcoming financial (election) year the government has programmed in a return to a freeze. Our Open letter calls on Labour to commit to abandoning this freeze and funding councils for the actual costs they have. The latest statistics show 109,000 households in temporary accommodation with 142,000 children. In addition there are more than 1.2 million households on housing waiting lists, These people will not be able to afford mortgages.
That’s why we believe Labour’s first housing priority should be funding social rent council homes. Although housing revenue accounts are ringfenced from council General Funds, councils which are collapsing financially are not likely to be building much council housing. Moreover we should guard against the possibility of councils being allowed to sell off council housing stock as part of their “fire-sale” of assets.
Labour Campaign for Council Housing 