Gloucester City Council is set to receive a crucial £15.5 million loan from the Government after Labour ministers approved the financial rescue package for the struggling authority. This intervention is part of a broader effort to help local councils across the country continue providing essential services amid growing financial pressures.
The Liberal Democrat-led council faced the threat of effective bankruptcy following several years of multi-million-pound overspending revealed in recent audits. The Government has agreed in principle to provide £9.05 million in exceptional financial support, divided into £3.89 million for the 2024/25 financial year and £2.56 million for the current year.
This loan will enable the council to allocate capital resources, including proceeds from asset sales and borrowing, to cover its operational costs. The exceptional financial support (EFS) scheme, established in 2020, assists councils on the brink of financial failure to restore balanced budgets.
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The Government’s commitment extends beyond immediate funding, aiming to help councils transform services and build long-term financial sustainability. Officials acknowledge that the reliance on EFS highlights the challenges posed by the outdated local government funding system, which they are actively working to reform.
As part of the first multi-year funding settlement in over a decade, a record-breaking £78 billion is being allocated to local authorities. This package marks a significant shift in funding methodology, using a new evidence-based approach to better account for the needs and true costs of servicing deprived communities.
Alison McGovern, minister for local government and homelessness, emphasized the importance of this support: “People in deprived areas have been let down for too long, with councils in the poorest areas left on their knees and services cut back as a result. The support we’re announcing is critical, and we are doing everything we can to ensure councils can balance the books.”
Gloucester’s Labour MP Alex McIntyre, who advocated for the loan, expressed relief that emergency funding was secured, preventing the need for government commissioners to take control of the city. “Without this funding, we faced bankruptcy. It’s essential the council learns from recent governance issues, poor commercial investments, and auditing failures to prevent a repeat.”
Jeremy Hilton, council leader and Liberal Democrat representative for Kingsholm and Wotton, echoed the sentiment, expressing relief and gratitude to council staff who helped secure the loan. He confirmed plans to move forward with a recovery strategy, which includes selling off some council-owned properties to improve finances.
Hilton acknowledged that prior investments in commercial properties and delays in developments like The Forum, combined with rising interest rates, contributed to the council’s financial difficulties. Though these projects have faced setbacks, the council sees them as valuable long-term assets that will generate jobs and support local regeneration.
The EFS loan will act as a temporary financial bridge, providing up to £15.5 million in cash flow while the council implements its recovery plan. Hilton remains optimistic: “If we follow through on our recovery plan, we expect to turn the council’s finances around over the next few years.”