Councils under intense financial pressure are being offered exceptional support from the government to help them balance their budgets and keep essential local

services running.

From today (23 February), a number of local authorities will be granted temporary financial flexibility under the government’s Exceptional Financial Support (EFS) scheme. The move is designed to prevent service failures and give councils breathing space as they work towards long-term financial stability.

Under the EFS process, eligible councils will be allowed—subject to strict conditions—to use capital resources, including asset sale receipts and borrowing, to cover day-to-day spending. While normally restricted, this flexibility is aimed at councils facing acute budget shortfalls and the risk of financial failure.

The EFS framework has been in place since 2020, but ministers say the current approach goes further than before. Alongside short-term support, councils will be expected to reform services, improve efficiency and put recovery plans in place to move back onto a sustainable footing.

The renewed use of exceptional support comes as part of a wider overhaul of local government finance. The government has confirmed a £78 billion funding settlement for councils, the first multi-year deal in more than a decade. Ministers say the settlement will allow more councils to stabilise their finances, restore frontline services and better support their communities.

Crucially, the funding package introduces a new evidence-based model for distributing money, using updated data such as the Indices of Multiple Deprivation. The aim is to better reflect local need and the higher costs of delivering services in the most deprived areas.

Minister for Local Government and Homelessness, Alison McGovern said:  “People in deprived areas have been let down for too long, with councils in the poorest areas left on their knees and services cut back as a result.  

“The support we’re announcing is critical for the councils, and we are doing everything we can to ensure councils can balance the books, including by making £78 billion available through the first multi-year settlement in a decade.” 

Any council receiving exceptional support will face rigorous oversight. This includes a full assessment of its financial position and, where necessary, further conditions or assurances to ensure public money is being used responsibly and that recovery plans are credible.

Officials say these assessments may examine governance, spending controls and service delivery models, with ongoing engagement from central government to prevent repeat crises.

Ministers insist the long-term goal is to reduce reliance on emergency measures altogether. By reforming how councils are funded and improving financial stability, the government says local authorities will be better placed to focus on what matters most to residents—protecting vital services, supporting the most vulnerable and delivering better outcomes for local communities.