London council 'bankrupt in six weeks' without Government bailout

A London council leader has warned his borough will be "bankrupt" in six weeks without Government intervention.

Havering Council has applied for a £54 million loan from the Government so it can balance its budget.

Leader Ray Morgon said if the payment is not approved, his town hall would be "basically bankrupt" and forced to issue a section 114 notice.

"We've applied to the Department for Levelling Up, Housing and Communities for a loan," he said.

"If we don't get that we're basically bankrupt."

The borough, which is run by a coalition of independent and Labour councillors, said its central government funding grant has been slashed from around £70 million in 2010/11 to under £2 million.

The Department of Levelling Up, Housing and Communities said it is working "closely" with the council but has not confirmed whether it will supply the funding.

Housing Secretary Michael Gove on Wednesday announced upper tier councils will be handed an additional £500 million for children’s and adult social care in 2024/25 following recent warnings of further bankruptcies.

Local authorities across the country have said they are facing severe financial pressures due to rising social care costs and spiralling homelessness.

London boroughs are at the forefront of the crisis. One in 50 Londoners is classed as homeless, according to umbrella group London Councils, and this has caused council temporary housing costs to soar.

The capital's town halls have collectively anticipated a continuing funding shortfall of at least £500 million for boroughs in 2024/25.

Before Christmas, Mr Gove announced a 6.5 per cent increase in funding for local authorities in England.

The Government has also told town halls they can increase council tax bills by five per cent in the spring.

But Mr Morgon warned at the time that it would not be enough for the struggling borough and was a "mere drop in the ocean".

He added: "Once again the Government has short-changed local government in the recent finance settlement.

"Havering is on the brink of effectively declaring itself ‘bankrupt’ by issuing what is known as a Section 114 notice because the cost of social care, homelessness and inflation is greater than the money we receive.

"We have been warning the Government for some time about this, and despite these warnings, they have not helped us deal with this problem."