Another Challenging Year Financially As Havering Council Let Down By Government Funding.

“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.”

Local democracy reporter Sebastian Mann writes:

Havering Council says “fundamental changes” to local government funding are needed to avoid long-term financial doom.

The east London authority will be entering the 2025/26 financial year with an unprecedented £71million budget gap – which includes last year’s shortfall of £32.5m.

Over the past 15 years, Havering has made around £160m in cuts to its services, which means there is a dwindling list of savings that can be made.

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.”

The current funding formula, which the government uses to assess councils’ need, is based on census data from 2011.

Havering councillors have repeatedly called the approach “outdated” and lobbied the Ministry of Housing, Communities and Local Government

In December, Havering was allocated £40m for the coming year – but now says it will need to borrow up to £90m from central government to avoid effective bankruptcy this year.

The loan is referred to as a ‘capitalisation direction,’ and will be paid off – with interest – over the next two decades.

Councils are required by law to provide certain services, including housing, social care for children and adults, and education.

Due to climbing costs, Havering currently spends around 80% of its budget on these mandatory services, limiting what it can offer. Earlier this month, the council controversially voted to close three libraries in the borough in a bid to save money.

The government also put aside a £600m emergency recovery grant for councils across the country, the first of its kind.

However, Havering did not receive a penny, which finance director Kathy Freeman said was “disappointing”. It was based on the level of ‘deprivation,’ which she said did not reflect the level of need.

Though the cabinet has agreed to increase council tax by 4.99% – the maximum allowed without a public referendum – senior councillors say they are hesitant to go higher.

Cllr Wilkins told reporters: “As a cabinet, we are in agreement we do not want to put our council tax up [past 4.99%].”

Council tax in Havering is currently set at the fifth highest rate in London. An average band-D property in the borough paid a total of £2,208 last year, compared to £2,089 in neighbouring Redbridge or £2,003 in Barking & Dagenham.

Proposals to increase council tax by 2.99%, with an extra 2% towards adult social care, were supported by the cabinet at a meeting on 5th February.

The final decision will be made at a full council meeting at the end of this month.

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 got much more difficult over the last five years.”

Due to a borough-wide shortage of homes, families are often kept in hotels or bed-and-breakfast style accommodation.

These nightly schemes are very costly for Havering, which ended up overspending on housing by £6.1million last year.

Local authorities receive 22% of their funding from government grants, 52% from council tax, and 27% from business rates.

Last year, 19 local authorities needed bailing out, up from eleven the year before. That figure is expected to climb to as high as 50 this year, as more authorities face challenges in housing and social care.

Councils cannot go bankrupt in a commercial sense, and instead issue a Section 114 notice to declare their income will fall short of its spending.

Once that happens, Whitehall appoints commissioners to take control of the town hall and cut any spending they deem superfluous.

Havering has not yet received confirmation from the government it will be able to borrow the eight-figure sum.

Any changes to council tax will come into effect on 1st April.

Stay up to date with all of our latest updates and content by following us on our social media accounts!

We have created community pages where we will share our up-to-date stories happening in the area. Add the area closest to where you live.