Ministers admit Havering budget crisis caused by structural government funding issues and not poor council leadership.

‘The minister repeated back to us that it’s a structural issue in Havering’-Andrew Blake-Herbert.

Local democracy reporter Josh Mellor today writes:

A Conservative minister privately admitted that Havering’s budget crisis is caused by “structural” issues with government funding, according to the council’s chief executive.

Ministers admit that Havering’s budget crisis is caused by “structural” government funding issues rather than poor management by the council’s leadership.

Havering is currently awaiting government approval for a £54million loan that is its only hope of declaring itself effectively bankrupt before early March.

The loan is needed to plug an estimated £52m budget black hole stemming from the soaring costs of adult social care, protecting children and temporary accommodation.

In a recent meeting with Havering’s chief executive Andrew Blake-Herbert, Conservative minister for local government Simon Hoare reportedly admitted that Havering’s financial crisis is caused by a failing in the way funding is handed out to English councils.

Speaking at a town hall scrutiny meeting yesterday (1st February), Blake-Herbert said: “The minister repeated back to us that it’s a structural issue in Havering.”

Hoare also admitted that if the government does not fix the national “structural funding issue” then Havering will continue to need large loans to balance its budget “year-on-year”, the chief executive added.

He accepted that Havering has not has not mismanaged its finances in the same way as Thurrock, Croydon or Slough.

The yearly interest on the £54m loan would be about £3.4m for next year alone.

Part of the reason Havering is unable to balance its books is that the government has failed to update the way it calculates councils’ needs since 2013.

The council receives £22m per year in grants to provide adult social care for its 46,000 residents aged 65 or older – the lowest funding level in East London.

In contrast, Newham, Hackney and Tower Hamlets councils each receive £41m but each have about half the number of elderly residents.

This week, MPs on the levelling up, housing and communities committee said English councils need £4billion more this year to avoid an “out of control” financial crisis.

The Department for Levelling Up, Housing and Communities (DLUCH), which is responsible for local government funding, has been approached for comment.

In recent weeks, spokespeople for DLUCH have repeatedly refused to answer the Local Democracy Reporting Service’s questions about the government’s role in Havering’s budget crisis.

The council’s finance boss Kathy Freeman has confirmed that the government must confirm the council can loan the £54m by 11th March to avoid declaring itself effectively bankrupt by issuing a section 114 notice.

Councils cannot declare themselves bankrupt but must formally issue a section 114 notice if they cannot balance their books.

In recent months, other councils, such as Birmingham and Nottingham, have issued the notices.

This would halt all new spending commitments and could result in government commissioners taking control of the council from its democratically-elected leaders.

Other councils which have issued such bankruptcy notices, such as Croydon, Thurrock and Woking have seen their council tax rates increased by as much as 15% – far higher than the usual cap of 4.99%.

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