A huge £77million loan has been approved in principle for Somerset Council by the Government.
It comes as effective loans totalling nearly £2.5 billion that have been requested by 19 councils suffering acute financial distress have been given an provisional ‘green light’.
The funding is being made available through ‘capitalisation directions’ that give councils permission to use capital funds, often generated by selling assets, to top up spending on services, reports the Press Association.
Birmingham City Council will be able to access the largest amount of £1.25 billion, followed by Woking Borough Council, which has secured £330.7 million. Both councils declared effective bankruptcy last year.
The next largest amounts have been approved for Bradford City Council and Southampton City Council of £220 million and £121.6 million respectively.
However, all councils in receipt of a direction have to pay off the capitalisation over the next 20 years, which is why they are often referred to as ‘loans’.
A total of eight councils will have access to £40 million or more, including Somerset Council (£77 million), Plymouth City Council (£72 million), Thurrock Council (£68.6 million), Nottingham City Council (£66.1 million), Havering Borough Council (£53.7 million), Croydon Borough Council (£47.4 million), Stoke-on-Trent Council (£42.2 million), and Cumberland Council (£41.2 million).
Warnings have continued over the perilous status of council finances and frontline services being under threat despite the Government recently making an additional £600 million available in the local government finance settlement.
If further funding is not forthcoming in the Budget on Wednesday (March 6th), communities will face the consequences of a worsening financial crisis across local government, the Local Government Association (LGA) has warned.
An LGA survey of council chief executives found 85 per cent of local authorities continue to plan reductions in spending on key services as the sector faces a funding gap of £4 billion over the next two years.
