Exceptional Financial Support

EFS is temporary financial assistance provided by the government to councils that are facing severe financial difficulties. This support is typically used to help a council meet its financial obligations, continue to deliver essential services and avoid the need to issue a ‘Section 114’ (effectively a bankruptcy notice).

It is not a grant, but permission to borrow - a line of credit that RBWM can draw from as and when required and the council will need to repay this.

A local authority can only borrow to fund capital expenditure. EFS allows the council to treat certain revenue spend as capital spend, as part of a ‘capitalisation direction’ - so instead of funding these costs from the revenue budget, which must be balanced annually, they can be funded by borrowing. Any borrowing related to the capitalisation direction can be for no more than 20 years.

Despite significant action taken by the council’s current administration and senior leadership team since 2023, to get the financial situation under control, by making savings, transforming services and generating income - a lack of reserves caused by historical decisions, including unsustainably low council tax and accounting inaccuracies combined with rising demand for services, particularly social care and homelessness accommodation - meant the council did not have the financial resilience to meet these pressures.

The state of the finances made it clear that the council needed a substantial financial support package from government, alongside a council tax rise above the current cap, to set a balanced budget and start to build back resilience over the medium-term.

Formal discussions with government, on exceptional financial support, started in May 2024 and the government confirmed a request for £103m for 2025-2026. The council then requested £49m of exceptional financial support, reflecting the level of support needed to balance the budget for 2026-2027.

This also follows the government announcing their response to the Fair Funding 2.0 review – which has left RBWM in a select group of councils that are worst hit by the changes to how government grant is distributed, with £30m of funding the council would have received over the next three years now going to other areas and further compounding the council’s financial situation.

Recognising that the borough’s historically low level of council tax, and that it is so out of kilter with other areas, is a significant issue for the council’s financial sustainability, the government also granted the council permission to raise borough council tax by 7.49% from April 2026 - an increase of 2.5% above the standard 4.99% limit before a referendum is required – still leaving borough bills the lowest in Berkshire and well below the national average.

RBWM received confirmation from government in February 2026 that they have approved the council’s request for exceptional financial support of £49m, reflecting the level of support needed to balance the budget for 2026-2027. 
 

EFS is provided through a financial flexibility, known as a capitalisation direction, where the government permits the council to treat revenue costs as capital costs and means councils can meet those costs using existing borrowing powers or via capital receipts.

It spreads the cost over several years rather than dealing with it all at once – while the council will look to repay this through asset disposals and transforming services, this alone are unlikely to be sufficient to repay the accumulated EFS.
 

The support allows the council to set a budget for the 2026-2027 financial year. By being able to balance the budget the council can continue to rectify historic budget issues, rebuild capacity in essential front-line services, and respond to increases in demand-led pressures in children’s and adult social care, and housing services. Replacing services that were historically stripped out - like maintaining borough streets, trees and play areas.

It also supports the council’s Financial Improvement and Sustainability Plan – addressing the recommendations from the independent CIPFA review and outlining the actions and decisions needed over the short and medium-term to get the council and its finances back on track.

The controls the council currently has in place on spending – including the Spending Control Panel that reviews all council spend over £500 - will be retained to prevent all non-essential spend and further strengthen financial governance.  

No, EFS does not necessitate the need for commissioners to run the council. The council will continue to function as it currently does, having set a balanced budget for the year ahead, and continuing to provide services to borough residents and businesses.
 

RBWM is not the only council to receive EFS –  36 councils have had similar arrangements agreed by the government for 2026-2027.

This follows the government providing 30 councils with support to manage financial pressures via the Exceptional Financial Support in 2025-2026.