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Thirty-six councils wait, none of them confirmed

2 min read
15:29UTC

MHCLG's guidance page, updated on 18 August, names 36 English authorities and gives every one of them the same status: support agreed in-principle.

EconomicDeveloping
Key takeaway

Every one of the 36 councils is still waiting for a capitalisation direction.

The Ministry of Housing, Communities and Local Government (MHCLG) updated its Exceptional Financial Support guidance for 2026-27 on 18 August 2026, and the page names 36 English authorities sharing a single status: "support agreed in-principle", with final amounts and capitalisation directions to follow "once confirmed" 1. Exceptional Financial Support is the arrangement an English council enters when it cannot balance its budget and needs central government's permission to do something it is normally barred from doing. On the page as updated, no authority has that permission in final form.

MHCLG has issued no capitalisation direction to any of the 36 authorities, which is the written permission a council needs before it can cover day-to-day running costs by borrowing or by selling assets. Until MHCLG issues one, a council's section 151 finance officer is budgeting against a promise. The support was agreed in principle in February . Six months on, the paperwork that turns the promise into money a treasurer can rely on is outstanding for every authority on the list.

The list carried 35 authorities when the page first appeared on 23 February 2026 and 36 by 18 August, the addition being the Isles of Scilly at £0.926m, with identical status wording at both dates. Nothing else about the cohort changed across those six months.

No section 114 notice, support agreement or capitalisation direction was published anywhere in this window. A section 114 notice is the formal declaration a council's finance officer issues when the books cannot be balanced, and the most recent on this record remains Nottingham's third, in March . A resident meanwhile notices none of the paperwork, only the library opening hours, the bin round and the state of the road.

Deep Analysis

In plain English

When a council cannot balance its budget, it can apply to the government for Exceptional Financial Support, essentially permission to borrow or sell assets to plug the gap rather than cut services immediately. The Ministry of Housing, Communities and Local Government (MHCLG) keeps a public list of which councils have this support. As of 18 August, that list names 36 councils in England, and every one of them is marked as only agreed "in principle", meaning the government has said yes to the idea but has not yet signed off the actual amount or the specific deal. None of the 36 has reached that final stage.

Deep Analysis
Root Causes

Exceptional Financial Support requires two separate government decisions: an in-principle agreement that a council may access support, and a later capitalisation direction that fixes the amount and terms. The first decision can be made on a council's own projected shortfall; the second requires MHCLG to agree the specific capital receipts, borrowing or asset sales that will fund it, a negotiation with no statutory deadline attached.

That two-stage design means a council can sit indefinitely between the two decisions without breaching any rule, because "agreed in-principle" carries no expiry date and no requirement to convert to a confirmed direction within a fixed period.

What could happen next?
  • Meaning

    Six months after the cohort was first named, no council on the 36-authority list has a confirmed support amount.

  • Consequence

    Councils cannot finalise medium-term budget plans that depend on Exceptional Financial Support until their capitalisation direction is confirmed.

First Reported In

Update #3 · Debt ratio fell; borrowing missed by £2.3bn

Ministry of Housing, Communities and Local Government· 3 Sept 2026
Read original
Different Perspectives
Structural case for reading the fall as genuine improvement
Structural case for reading the fall as genuine improvement
The debt ratio fell, borrowing fell year-on-year in cash terms by £6.0bn over the financial year to date, and two gilt auctions cleared at bid-to-cover ratios of 3.39 and 3.58 times with no sign of buyers demanding a premium for risk. On that reading, the state of Britain's public finances has not deteriorated this fortnight.
Office for Students
Office for Students
OfS's November 2025 modelled scenario puts 45% of providers in deficit for 2025-26; its separate May 2026 annual report, counting what providers actually filed for the identical year, puts the figure at 36.6%. Neither publication reconciles the two for the reader.
Regulator of Social Housing
Regulator of Social Housing
The RSH's Q1 survey of 195 landlords found cash interest cover falling to 59% and described recovery as "slower than previously forecast", while recording the same sector raising £4.3bn and lifting its twelve-month development forecast to £16.0bn, a three-year high.
Chartered Institute of Public Finance and Accountancy
Chartered Institute of Public Finance and Accountancy
CIPFA's External Assurance Review, published by MHCLG on 18 August, found Worcestershire County Council does not anticipate exiting Exceptional Financial Support before 2028 at the earliest, based on the council's own overspend concentrated in adult and children's social care.
Ministry of Housing, Communities and Local Government
Ministry of Housing, Communities and Local Government
MHCLG's own guidance page still lists all 36 named authorities as support agreed "in-principle", stating final amounts and capitalisation directions follow "once confirmed", a status unchanged since February despite the list growing to 36 authorities by 18 August.
Office for Budget Responsibility
Office for Budget Responsibility
The OBR's Economic and Fiscal Outlook, the forecast the ONS bulletin was checked against, dates to 3 March 2026 and will not be updated until 28 October, with no change made in this window to the 1.4% long-run productivity assumption that most moves its debt projections. It made no comment on this fortnight's releases directly.