Havering Council has announced that it will not be declaring bankruptcy this year after the government approved a “capitalisation direction” worth £54 million.

The council’s chief executive, Andrew Blake-Herbert, told councillors at a meeting on Wednesday (February 28) that 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.

The council had requested the government for a capitalisation direction, in other words a loan, at the current interest rate of 7% to help cover these costs and that loan has now been approved.

This means that the council is currently saved from issuing a Section 114 notice - effectively declaring itself bankrupt - and has been able to put forth a budget which was passed with 27 votes in favour, 20 against and two members abstaining.

Cllr Chris Wilkins, cabinet member for finance, called the 2024-25 budget the most difficult one in the council’s history and said that, even with the loan, it will have to implement £15million worth of savings.

Read More: Havering Council gets 'no indication' from government on loan

The council tax for the next year, he said, will increase by 2.99% with an additional 2%, as set by the government for social care.

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.

Dimming lights by 30% on main roads, increasing market pitch fees to adjust for inflation, ending Romford’s Sunday market, raising parking fees and charges for bulky waste and green collections, reducing the cost of Christmas lights and trees, and launching a review of children’s centres and libraries were among the proposed savings approved at the meeting.

Cllr Wilkins said that the budget presented was a realistic assessment of the pressures facing Havering Council, which he said had always managed its finances carefully and been prudent in decision-making.

He blamed increasing unit costs, demands on social care, changing demographics of Havering and rising homelessness as some of the factors contributing to the council’s difficult financial position.

He added: “The council is one of the worst-funded in London. We received the fourth lowest grant funding per resident in London despite having the second oldest population and fourth highest growing child population in the country."

He said the council carried out public consultations on its savings proposals last year and received close to 4,000 responses. 69% of these, he said, were against the council’s original plan to increase parking charges by 40%, so an increase of just 20% was implemented. 

In the case of increasing football pitch fees, he added that the council has listened to its residents and it will only be raising the fees to cover inflationary cost.

In addition, the earlier proposals for charging in park car parks and Sunday parking charges have been scrapped.

Councillor Keith Prince, leader of the Conservative group in Havering, presented an amendment to the council’s budget jointly with East Havering Residents’ Group (EHRG).

He questioned the council’s plans to spend £200,000 on a feasibility study for a Romford Master Plan, and claimed that while the council is stretched for finances, the last thing it needs is another feasibility study like the one done for having a tram in Havering.

He objected to the council’s plan to close the Sunday market in Romford, and the amendment instead recommended to cut the fees the council charges to stall holders to have more of them come along and “reinvigorate the market”.

His party and the EHRG also strongly opposed what they deemed as the cuts to school transportation services for children with special education needs and disabilities.

Cllr Prince said: “These children are our most vulnerable citizens. They need constant care and attention.

“They find it very difficult to deal with change and breaks in routine. They will not be able to deal with this. I think this is very irresponsible."

Adding to the criticisms of the budget, Councillor Martin Goode of EHRG highlighted that the rise in parking charges by 20% could have an adverse impact on the community and local businesses.

He said: “Things have already been very difficult for them (the residents) with the high interest rates and cost of living crisis.

“We appreciate how difficult it is to present a balanced budget, but the increases that you are proposing just aren’t achievable. The residents won’t put up with this. They will go elsewhere to do their shopping due to parking charges. Small businesses will go bust."

Labour Councillor Keith Darvill, who voted in favour of the council’s budget proposal, claimed in response that the council’s struggles are rooted in the actions of the Conservative government.

He noted that the government’s austerity measures, failure to consider changes in the borough’s demographics, not implementing a funding review despite numerous promises, among other things, has made the council seek a government loan that will only cost more in the future.  

“I am surprised that their (the opposition's) proposal is to cut the cost of the Romford Master Plan when what we need for Romford is to take advantage of the interest there is for private investment. That master plan is needed for Romford," he said. 

“In relation to the comments made about SEND savings, I think Cllr Prince misunderstands the situation there. There is no intention to cut services at all."

He added that 35% of the consultation respondents suggested having more personalised services in the case of SEND school transport, and the council will be organising these services.

“If we can reduce our expenses by efficiency savings which do not damage the delivery of services, we have an obligation to do that," he said.

The amendment presented by Tory and EHRG councillors was rejected at the meeting with 29 votes against, 19 in favour and one abstained from voting.

Despite the council's financial challenges, a spokesperson said it will deliver statutory services that matter to local people like spending £5.5m on maintaining and improving roads and pavements, continuing to fund S92 police officers to keep the borough safe, investing in new affordable homes and vital social care services for adults and children. 

Councillor Ray Morgon, leader of Havering Council, expressed concerns about what happens next even after the government loan this year. 

He said: "We will continue to look at more efficiencies and lobby all political parties for sustainable local government. If this is not resolved, we will regrettably see further reductions to non-statutory services in the future and/or further loan requests."