Record 29 English Councils to Sell Assets & Borrow Cash for Budget Relief

More Struggling Councils to Sell Assets and Borrow Cash

In a significant move aimed at easing financial pressures, the government has relaxed budgeting rules for a record 29 English councils, allowing them to balance their books next year by selling assets or borrowing cash via Treasury loans.

New Financial Flexibility

Under the new measures, councils are permitted to use funds raised from asset sales—normally restricted to cost-saving projects such as back-office mergers or digital transitions—to cover day-to-day spending. They are also allowed to access Treasury-backed loans, which have traditionally been reserved for long-term investments. Additionally, the government has removed the 1% surcharge on these loans, a cost many local leaders likened to pay-day loan fees.

Rising Numbers Reflect Fiscal Strain

The number of councils requesting such flexibility has increased to 29 this year, up from 19 in the previous cycle, underscoring the growing financial fragility within the local government sector. These 29 councils collectively seek an estimated £1.5 billion in additional funding to manage their short-term budgetary challenges.

Councils across England will have a projected spending budget of £69.4 billion next year, assuming a maximum council tax increase of 4.3% in real terms. However, local leaders argue that this boost will not suffice to cover the escalating costs of mandatory services such as adult social care and special educational needs.

Preserving Community Assets

While the new rules provide essential breathing room, ministers have stressed that councils should avoid selling “community and heritage assets.” The government leaves it up to local authorities to decide which assets qualify as non-core, aiming to strike a balance between short-term fiscal relief and long-term community interests.

Long-Term Financial Reforms on the Horizon

Beyond these immediate measures, the government is considering broader reforms, including the introduction of multi-year budgets and a revised funding formula that links overall funding to levels of deprivation and rurality. These changes are intended to create a fairer system, particularly for councils in poorer areas that struggle to raise local revenue.

However, some local groups, including London Councils, have expressed concerns that these short-term fixes could exacerbate long-term debt burdens. They warn that while the current measures may provide temporary relief, they could ultimately leave councils with increased financial liabilities.

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