Council leader Ray Morgon. Credit: Havering Council
(Written by Local Democracy Reporter, Sebastian Mann)
The cash-strapped authority was one of 30 across the country to be offered a ‘capitalisation direction’ ahead of the new financial year.
It is set to enter 2025/26 with a £71m black hole in its budget, which includes last year’s shortfall of £32.5m.
Ray Morgon, leader of the council, said the eight-figure loan would help cover the “worst case scenario”.
He said: “The latest government announcement covers 2025/26 and as things stand we have applied for £88million to help us cover the worst case scenario, including spiralling costs for social care and homelessness in the borough.”
Social care and housing are the two biggest strains on the council’s coffers.
It overspent its housing budget by £6.1m last year, paying high fees to keep homeless families in nightly hotels or bed-and-breakfast style accommodation.
This is the second year in a row Havering has needed to apply for ‘exceptional financial support,’ after it was loaned £32.5m to cover 2024’s budget.
It will function effectively as a line of credit, which the council can draw from as and when required. It will be paid off, with interest, over the next two decades.
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.”
Despite the cautious optimism for the coming year, the council has confirmed it will need to withdraw the previous year’s loan in its entirety.
Earlier this month, the council controversially agreed to close three libraries in the borough and increase council tax by almost 5%. 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.
Havering has made around £160m in cuts over the past 15 years, which means there is a dwindling list of future savings that can be made.
Top councillors previously warned that “fundamental changes” to the government’s funding formula were needed, to prevent financial doom.
Speaking to reporters earlier this month, 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 next year saying the same thing.
“We may not be asking for £70m or £80m – it could be up to £150m.”
He said the reason councils across the UK were relying on loans was because they were not getting the right funding in the first place.
Around 80% of Havering’s funding goes towards covering its statutory obligations, such as schooling, transport, housing and social care for children and adults.
This leaves relatively little for other projects, though Havering London has secured investments of £1.6m for its ‘A Good Life’ cultural scheme.
The ‘cultural and placemaking’ organisation, partly controlled by the council, will install a new heritage trail in the borough, host a ‘landmark public event’ in Romford market, and open an archive dedicated to club culture.
It will also oversee the development of a new artist studio and skills development programme, as well as a ‘network’ of community venues to host exhibitions.
The organisation is now seeking a further £800,000 in public donations, after raising £1.6m through grants from Arts Council England and the National Lottery Heritage Fund.
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.”
Last year, 19 local authorities needed bailing out, up from eleven the year before.
Other London councils to receive a loan this year include Haringey, Newham and Croydon, which has been offered £136m.
The largest bailout will go to Birmingham City Council, which will receive £180m.
