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Is Britain Actually Broke?
27JUL

Emergency support now covers 36 councils

3 min read
11:11UTC

MHCLG agreed emergency financial support in principle for 36 English councils for 2026-27, worth roughly £1.74bn. Two years earlier the figure was 18 councils.

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EconomicDeveloping
Key takeaway

Emergency support for councils has doubled in two years without crossing any legal threshold at all.

The Ministry of Housing, Communities and Local Government agreed Exceptional Financial Support in principle for 36 English councils for 2026-27, worth roughly £1.74bn 1. Exceptional Financial Support, or EFS, is permission to plug a hole in day-to-day running costs using borrowing or asset sales, repaid over as long as twenty years. In practice it converts this year's bin collections and social care into two decades of debt. The rubbish taken away this week can end up being paid for into the mid-2040s.

Two years earlier, 18 authorities took £1.4bn. For 2025-26, 19 councils had preliminary approval to capitalise £2.5bn. Then 36 2. Six of the 36 are already under statutory intervention, meaning central government has taken direct control of their finances.

The allocations run from Shropshire at £121.0m and Croydon at £119.0m down to the Isles of Scilly at £0.926m 3. That spread is worth noticing: this is not a story about a few notorious failures in big cities, it reaches a council of about 2,000 people off the Cornish coast. Local Government Chronicle reported an interim figure of 35 councils and £1.5bn on the day of the announcement, and the government guidance page has since been updated with the higher count 4.

A bank in trouble meets a resolution regime built after 2008: capital floors, stress tests, statutory powers to force losses onto creditors. A council in trouble meets a minister and a negotiation. Nothing in the EFS process has a threshold that fires automatically, which is exactly why the authority count can double in two years without any statutory trigger being crossed. Our declared trigger for this ledger, set today and carrying no legal weight whatsoever, is more than 40 authorities on support for 2027-28.

Deep Analysis

In plain English

A council budget has two parts: revenue, day-to-day running costs like social care and bin collections, and capital, spending on buildings and long-term assets, usually paid for with borrowing. Councils are legally required to balance the revenue budget every year; they cannot run an ordinary overdraft the way a business can. Exceptional Financial Support (capitalisation direction) is government permission to treat some of this year's revenue shortfall as if it were a capital cost, borrowed and repaid over up to 20 years. It solves this year's arithmetic problem but creates a smaller repayment-adjusted budget every year afterwards, which is why the number of councils needing it has kept climbing rather than falling.

Deep Analysis
Root Causes

Adult social care and special educational needs and disabilities (SEND) transport and support costs have grown faster than the core local government finance settlement, which still leans on council tax and retained business rates rather than a fully needs-based formula. A council facing a statutory duty to provide care cannot simply decline to spend, unlike discretionary services.

Capitalisation directions let a council borrow to cover a revenue shortfall and repay over up to 20 years through minimum revenue provision (MRP), a fixed annual budget line. Each new direction adds to that repayment schedule, so a council granted support this year carries a slightly smaller revenue budget for services every year until the mid-2040s, making the following year's gap marginally harder to close without new support.

What could happen next?
  • Consequence

    Each capitalisation direction locks in a fixed annual repayment (MRP) for up to 20 years, permanently shrinking the affected council's discretionary revenue budget regardless of future funding settlements.

  • Risk

    If the authority count on Exceptional Financial Support keeps rising at the recent pace, the trigger of 40 authorities for 2027-28 declared in this briefing's register could be reached within a single further funding round.

Sources:Ministry of Housing, Communities and Local Government
Mentions:Ministry of Housing Communities and Local Government (MHCLG) →Shropshire →Croydon →Isles of Scilly →Local Government Chronicle →Exceptional Financial Support →Institute of Economic Affairs →
First Reported In

Update #1 · The distress moved from banks to councils

Ministry of Housing, Communities and Local Government· 27 Jul 2026
Read original →
Causes and effects
Caused by
Nottingham files its third s114 notice
Nottingham's third section 114 notice is one instance of the local government distress reflected in the EFS count rising to 36 councils.
Occurred 28 Feb 2026
Read story →
This Event
Emergency support now covers 36 councils
A backstop designed for a handful of outlier councils now covers three dozen authorities in a single year, and nothing about that crosses a legal threshold.
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Institute for Fiscal Studies
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Chartered Institute of Public Finance and Accountancy
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