A total of 37 financially struggling councils across the country have been approved to receive exceptional financial support aimed at improving frontline services, with a special emphasis on aiding deprived communities.
Shropshire Council will receive the largest allocation, totalling £121 million this year, closely followed by Croydon with £119 million. Warrington and Haringey will also benefit substantially, receiving £92 million and £84 million respectively.
These councils will be granted capitalisation support, allowing them to use capital funds—such as sales receipts and borrowing—to cover routine operational costs. This move is designed to help councils legally balance their budgets and maintain vital local services.
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The government acknowledges that the need for such support highlights flaws in the outdated local government funding system. In response, it has introduced a record-breaking £78 billion multi-year funding settlement, marking a significant shift in how funds are allocated. This new approach incorporates updated indices of multiple deprivation to better address the real costs of service provision in deprived areas.
Local Government Minister Alison McGovern emphasized the long-standing neglect of deprived communities: “People in deprived areas have been let down for too long. Councils in the poorest areas have been pushed to the brink, with essential services cut back as a result. The support we are providing is critical to helping councils balance their books and improve services.”
In a written statement, McGovern highlighted the lasting impact of “14 years of austerity and decades of centralisation” that have left many councils struggling. The reforms mean that by 2028-29, the most deprived areas will receive 45% more funding per capita than the least deprived, ensuring that nine out of ten councils get funding aligned with assessed needs.
Education Secretary Bridget Phillipson also confirmed that children with complex educational needs will retain their support plans under upcoming reforms. Additionally, up to 90% of councils’ deficits related to high needs support accrued until 2025-26 will be written off—a measure valued at over £5 billion.
McGovern concluded: “These actions are laying the groundwork for recovery, but the legacy of previous financial mismanagement will take time to overcome. That is why we are confirming support in principle for the most challenged councils. Unlike previous administrations, our approach requires councils to focus on transforming services to ensure sustainable improvement.”