Council faces ‘inevitable’ effective bankruptcy without new financial help

Effective bankruptcy is ‘inevitable’ if the Royal Borough does not receive more Exceptional Financial Support from the Government for the next financial year, it has been warned.

The draft budget for 2026/27 and a medium-term report for 2030/31 are due to come before cabinet at a meeting on Tuesday (December 16), breaking down the borough’s financial challenges.

Residents will get the chance to comment on the council’s financial decisions during a six-week public consultation, running from December 17 to January 30 next year.

A final decision will be made by full council at a meeting in March.

A report on the draft budget warned that a section 114 notice is ‘inevitable’ without a capitalisation direction – otherwise known as Exceptional Financial Support (EFS) – or an increase in council tax above the 4.99 per cent cap.

A section 114 notice is issued by the council’s chief financial officer when they believe that the Royal Borough cannot balance its budget. Any non-essential spending is stopped, and Government-appointed commissioners may step in to review and manage finances.

The Government allowed RBWM to increase its council tax to 8.99 per cent for 2025/26.

In February this year, the council also received permission from the Government for £103million of borrowing through EFS.

The council will continue to rely on Government financial support because, without it, the revenue budget for 2026/27 will reach an in-year deficit of £50.671million.

Councillor Lynne Jones, the council’s cabinet member for finance, said changes to Government funding will see the Royal Borough as ‘one of the biggest losers nationally’.

Cllr Jones said: “We are experiencing the same increasing service demand pressures as other areas.

“By severely reducing our funding government has torn apart our medium-term plan for financial recovery and forced us into a position where there is no choice but to turn to them for significant support – to enable the council to continue to be financially viable and deliver the services our residents deserve.”

The medium-term draft report showed that if a ‘significant council tax increase’ was applied, EFS would still be needed, but the budget gap would be significantly lower.

For example, increasing council tax every year over a three-year period to bring it in line with the national average would take RBWM’s funding deficit down to £38.213million.

A £14million increase in spending has been included within the draft budget, with £3.35million of this directed towards adult social care and an additional £5.65million for children’s services.

Housing and temporary accommodation remain a financial pressure for the council, with an extra £1.88million allocated to help alleviate this pressure in demand.

The budget also proposes total savings worth £5.8million.