We explain what it means after West Berkshire Council ask the government for exceptional financial support

It is hard to overstate the seriousness of the announcement that West Berkshire Council has asked the Government for exceptional finance support.

So what is this?

Councils are legally obliged to balance the books each year. With more 2025/26 draft budgets being presented at council meetings across England by the day, one theme is emerging. Exceptional financial support (EFS).

Last year, 19 local authorities requested the Government’s help to balance their books. This year, around 29 have.

If the Government refuses West Berkshire’s request, it will have to find £3m of further savings to balance its books – with no reserves in the piggy bank.

Despite being described as support, EFS will not necessarily provide councils with genuine additional funding.

This means councils with social care responsibilities are unable to balance the books next year without contravening the long established accounting principle of not using capital to fund revenue.

Whether the council is using assets or borrowing, or a combination of both, this will make them poorer. Possibly for years to come.

If evidence were needed that the system for funding local government, particularly social care, was broken then here it is.

If the £69bn announced last week in the local government finance settlement is granted as ministers have said they are minded to, then councils will be able to use funds raised from asset sales or additional borrowing to fund day to day spending.

EFS is temporary financial assistance provided by the Government to local authorities that are facing severe financial difficulties.

This support is typically used to help a council meet its financial obligations and avoid the need for a s114 report. This is a bankruptcy report. Once this is triggered, councils must not spend any more money.

It is one-off funding that the Government supplies to the council, that the council needs to repay.

How will the council pay this back?

The capitalisation direction allows local authorities to treat certain revenue spend as capital spend.

This means that instead of funding these costs from the revenue budget (which must be balanced annually), they can be funded by borrowing or from capital receipts, ie asset sales.

West Berkshire Council says it will pay this money back through selling assets, and it has a pipeline of commercial property sales already, to reduce the cost of undertaking long term additional borrowing for fund this.

Why is the council requesting EFS?

The council has faced some major increases in demand. Social care costs have risen from 56 per cent of the budget in 2017-18 to 74 per cent in 2023-24.

With home to school transport costs increasing by 44 per cent in the past two years and the number of residents who are homeless that the council is funding increasing from 19 households to 54 households in temporary accommodation in the past two years, the council is facing unprecedented demand.

But West Berkshire isn’t in as deep as other Berkshire councils.

Windsor and Maidenhead asked for permission to increase its council tax by 20 per cent. The Government said no, but did agree to an 8.99 per cent rise.

West Berkshire is still at 4.99 per cent.

“Recognising that only by increasing council tax and reducing the reliance on borrowing will the council become financially sustainable – our ask, to raise council tax by 20 per cent above the current cap of 4.99 per cent, was on the scale of increase necessary to set our budget following years of cuts to council tax from 2010,” said a Windsor and Maidenhead spokesperson.