Emergency loan for Havering not guaranteed

The government will not give Havering Council a “guarantee” that it can borrow millions of pounds to avoid declaring itself effectively bankrupt.

Havering is facing a severe financial crisis as it battles to balance a £31million budget gap by the end of the financial year in March.

The vast majority of the council’s overspend is on social care and housing the homeless.

As a local authority, the council has a legal duty to approve a balanced budget by March 11 each year.

Without the loan, the council’s only choice would be to declare itself effectively bankrupt by issuing what is known as a Section 114 notice.

Last month, the council asked the government for a large loan in a final bid to balance its books and avoid bankruptcy.

At a meeting on Wednesday January 18, chief executive Andrew Blake-Herbert said the council has scheduled an “extraordinary” council meeting on March 6 because the government cannot guarantee it will approve a loan before Havering’s planned budget-setting meeting on February 28.

The Department for Levelling Up, Housing and Communities (DLUCH) is understood to be “assessing” Havering’s request for a loan.

However, the department has not responded to requests for comment.

Issuing a section 114 notice would mean the council has to stop all new spending other than for legally required services such as social care, waste collection, and protecting vulnerable people.

It could also mean that control of council spending is taken from democratically-elected councillors and handed to government commissioners.

Speaking to the Local Democracy Reporting Service (LDRS), council leader Ray Morgon said the government appears “very much sympathetic” to the council’s financial plight.

However, he added: “I don’t think that gives an indication of whether they will say yes or no [to the loan].”

It remains unclear exactly how much Havering Council has asked to borrow.

Havering Council’s leader Ray Morgon says the government has “short-changed” the council in its grant funding for next year (2024/25), which is set to increase by 4.49 per cent to £39.5m.

Cllr Morgon said this increase is a “mere drop in the ocean” and is “even less” than expected.

The Local Government Association (LGA) has said the lack of government funding for councils across the country will create a £4billion gap in the next two years.

In a statement released last month, the LGA called the low level of funding “unthinkable”.

However, Secretary of State for Levelling Up, Housing and Communities Michael Gove has said councils will have “the support they need”.

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Josh Mellor

Local Democracy Reporter