Blog- 9th May, 2025, Capsticks, Corporate Partner

Government to step in and reduce debt

In our latest blog, we look at some of the recent developments in relation to Local Government and Reorganisation.

Central Government to reduce debt

Central Government has confirmed it will step in to reduce debt in the following local authorities:-

• Woking – its £2bn debt will not be written off, but the The Government will provide financial assistance to support repayment of debt in 2026/2027 prior to reorganisation.

In a report published on 29 April, Woking Borough Council cited that on 16 April 2025, Ministry of Housing, Communities and Local Government (MHCLG) announced its commitment to provide an initial tranche of financial support for debt repayment for Woking Borough Council in 2026 -2027, ahead of the implementation for reorganisation in Surrey.

• Thurrock – The Government accepts Thurrock holds unsupported debt (debt figure is £1.5bn), and again, they have agreed to provide an initial tranche of financial assurance ahead of the implementation of reorganisation in Greater Essex.

In 2025/2026, Ministers granted £1.4bn for Councils via the Exceptional Financial Support programme. Thurrock has been receiving such support under the programme since 2022/2023 and is expected to receive £72M in 2025/2026.

• Spelthorne – The Government will provide similar financial assistance to Spelthorne (debt circa. £1bn) ahead of reorganisation in Surrey.

Spelthorne Borough Council’s commercial property portfolio generated approximately £49m in 2025, but the Government remains concerned about the Council’s level of debt, which was estimated to be 87 times the Council’s spending power.

These steps show an acknowledgement by the Government that such local authorities’ debt cannot simply be transferred to new unitary authorities as part of reorganisation, but it will be interesting to watch how this will be dealt with in detail and whether this establishes a precedent for other local authorities.

Elections - May 2025

Whilst plans for devolution and local government reorganisation are progressing, 23 local authorities held local elections this month, most were county council elections in areas with district councils, as the county council elections in areas within the Devolution Priority Programme had been postponed until next year to align with the timescales for devolution. Given the political changes which resulted within several local authorities as a result of the elections, it will be interesting to see how the proposals for reorganisation submitted in the Interim Plans at the end of March are progressed over the coming months in preparation for submission in November.

There were also six mayoral elections, this included mayor re-elections in four combined authorities: Cambridgeshire & Peterborough, Doncaster, North Tyneside, and West of England. Greater Lincolnshire and Hull & East Yorkshire are both new mayoralty areas and appointed their first Mayor on 1 May 2025.

What does this mean for Local Government?

The new mayoralties mean that the majority of the English population will live under the governance of a mayoral combined authority. Powers and functions drawn down from the strengthened Devolution Framework will be greater for areas where there is a mayor.

The results of these mayoral elections could have a significant impact with regard to policy settings and priorities for the area. Our team of experts will continue to monitor the progress of these changes and provide further details as they come.

Best wishes, 

Megan Tam 

Rebecca Gilbert

Tiffany Cloyne