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Havering: Cash-strapped London council gets £54million Government loan to avert bankruptcy

A cash-strapped London borough has been granted a last-minute £54million loan to prevent it plummeting into bankruptcy.

Havering council was on Wednesday night able to sign off its budget after the Government agreed the payment following weeks of warnings that the town hall was on the verge of going bust.

But the loan will only bring short term relief, allowing councillors to balance the books for the coming financial year, and cover a projected overspend from 2023/24.

The independent-run authority will still increase council tax by the maximum 4.99 per cent from April, and make a raft of savings - including by dimming streetlights and reviewing bin collections.

Residents in the borough already face some of the highest council tax bills in the capital, with the average band D household paying £2,088 a year.

The council’s chief executive, Andrew Blake-Herbert, said Levelling Up Secretary Michael Gove had written to the authority to tell them he was “minded to approve” its request for help - with the full £53.7m requested to be made available.

The authority had been facing a £32.5m budget gap for 2024/25, rising to £82.2m over four years.

Council leader Ray Morgon said the borough was battling “an outdated funding formula” which hasn’t kept pace with the rapid change in population and “resulting in years of systemic underfunding from Government”.

He highlighted how the care for a single dementia patient can cost the town hall more than £210,000 a year, while a looked after child can result in fees of £8,000-a-week.

The borough has the second oldest population in London, coupled with one of the fastest growing populations of young people in the country, placing high demand on both adult and children’s social care.

Chris Wilkins, the council’s cabinet member for finance, said: “The yearly erosion of funding is undermining how we deliver our services to residents.

“Rather than short term fixes, which are nowhere near good enough, a long term solution must be found. If this is not fixed, local government will be facing a bleak future.”

He added that this year’s budget was “one of the most difficult in recent memory”.