Starmer bales out London Councils but “fines” Tower Hamlets

ALL COUNCILS are equal – but, under Starmer’s Labour Government, some are more equal than others. The cash-strapped Government that had to axe the Winter Fuel Allowance for pensioners has found funds for a selective cash bailout to some failing Councils.

Councils used to be funded in line with a standard formula. Tory governments tweaked the formula to favour rural authorities, and Labour governments tweaked it back in favour of urban authorities. In either case, Councils were bound by Margaret Thatcher’s law that Councils must agree balanced budgets.

Local Authorities’ funding was slashed under David Cameron’s “austerity” Coalition and Tory Governments, and it only took exceptional circumstances (or a single stupid decision) to push Councils over the edge. You can’t let a Council go bankrupt and cease trading, and so governments began to step in with various cash handouts to see them through.

This flexibility is now known as Exceptional Financial Support (EFS). The scheme allows Councils totake out emergency loans from the Government’s Public Works Loan Board: this balances their budget in the short term, but it leaves them with higher debts to repay, which will trim their spending in future years.

Eight Councils received EFS handouts in 2023-24. This year, 2024-25, the number more than doubled, with 19 receiving the lifeline payments. The Starmer Government announced on 20th February that it is giving these special supplementary sums to 30 local authorities in England and Wales for 2025-26. Six of these councils are in London, and they will share an extra £418 million. Last year just two London boroughs received EFS funds, totalling £71 million.

Which London boroughs have received the extra support to keep the financial wolves from the door? The following sums have been agreed in principle.
•Barnet – £55.7 million
•Croydon – £136 million
•Enfield – £10 million (plus £20 million for last year)
•Haringey – £37 million (plus £28 million for last year)
•Havering – £88 million
•Newham – £51.2 million (plus £16 million for last year)
In addition, Lambeth is to receive £40 million “support to manage financial pressures within its Housing Revenue Account (HRA).”

Also receiving Exceptional Support is Birmingham. The Council there has been given £180 million for 2025-26. It received £685 million in last year, but this payment has now been revised down to £490 million. It is not clear if this special treatment arises from the work of Government Envoy John Biggs, the former Tower Hamlets Mayor who couldn’t get his own accounts signed off by external auditors for seven years but who was sent in by the Government to sort out the financial troubles of England’s second city.

London Councils, the voice of London’s Councils, has called on the Government to find a sustainable solution to the crisis in funding London Councils. Cllr Claire Holland, Chair of London Councils, said, “These figures show almost a quarter of town halls in London would face financial collapse without emergency borrowing. Exceptional Financial Support is a misnomer – it is no longer exceptional and it fails to provide sustainable financial support, instead forcing local authorities to borrow to maintain basis statutory services. Rather than resolve the crisis, EFS is a short-term measure that leaves us wth more long-term debts to worry about.”

London Councils calculates that across London there is a £180 million overspend on Adult Social Care, £150 million on children’s social care,and £270 on homelessness (a figure that has doubled over the last twelve months).

In contrast to the above failing local authorities which have received cash to see them through, Tower Hamlets Council, with all its deprivation and a growing population, hasn’t received a brass farthing. Despite this, Executive Mayor Lutfur Rahman, assisted by his able Cabinet Member for Resources Cllr Saied Ahmed, has balanced the budget for the third year running. Not only is he keeping popular frontline services going, Mayor Rahman has also found extra funds to restore the Meals on Wheels service cut by former Labour Mayor John Biggs and to introduce a new, universal, school uniform grant. These new projects are in addition to the Winter Fuel Allowance that Mayor Rahman is paying out to the pensioners Labour’s Keir Starmer took it away from.

It gets worse. While they are rewarding failing local authorities with these cash handouts, the Government has sent in envoys to look at Tower Hamlets Council’s balanced budget and check that the Council is delivering “Best Value”. And the hard-pressed taxpayers of Tower Hamlets are having to foot the bill! Under Starmer’s Government, Councils get rewarded for bad behaviour and charged if they balance their budget. You couldn’t make it up.

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