Exceptional Financial Support - FAQs

What is Exception Financial Support (EFS)?

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. The Council will request funding for EFS through what is called a "capitalisation direction". 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 i.e. asset sales. 

To use this direction, local authorities must apply to the Ministry of Housing, Communities, and Local Government (MHCLG) for permission; the Executive report of the 13^th February requests this. It is often used to manage extraordinary financial pressures by spreading the cost over several years rather than dealing with it all at once.

The Council will pay this money back through selling assets, and it has a pipeline of 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% of the budget in 2017-18 to 74% in 2023-24. With home to School Transport costs increasing by 44% 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. 

What is EFS funding?

The EFS request is for £16m of funding. £2.8m of this is requested to support the revenue budget for 2025-26. The remaining is requested to go directly into the Council's reserves in 2024-25. The Council has one of the lowest levels of reserves of any Council in the country at £4m. This represents 2% of the budget, or the equivalent of eight days of funding.

What does this mean for residents and the Council?

The Council will continue to function as it currently does, setting a balanced budget for the year ahead, and providing its range of services.

Does it mean additional savings?

Not immediately - the Council in the current year (2024-25) is already delivering over £14m of savings - the highest ever in the Council's history. The savings figure for 2025-26 is £11.2 and the EFS request is on top of this savings requirement. Per the above, the EFS request will be funded by asset sales / borrowing; where income decreases or borrowing costs increase will need to be taken into account in future years.

What about future years?

The Government are undertaking a fundamental review of Local Government finances for 2026-27 onwards. Further information is expected during 2025 on what this will mean for West Berkshire.

How many other Councils have EFS?

In 2024, 19 Councils requested EFS. 17 of these were unitary Councils like West Berkshire Council, and the requested amounts ranged from £3.9m to £685m.

Will this mean someone else runs the Council?

No. the Government will want to review the Council and provide additional scrutiny of its decisions, but it does not necessitate the need for Commissioners to run the Council solely due to the EFS request.

Does this mean the Council is bankrupt / issuing a s114 statement?

No - the purpose of the EFS request is to avoid having to issue a s114 notice and undertake any knee-jerk response to the growing financial demands on the Council