Newham Council is facing significant financial headwinds, primarily driven by rising social care and housing costs, particularly the need to provide temporary accommodation. Despite this, the council maintains its status as a 'going concern', according to reports presented at a recent Audit Committee meeting. Adding to the complexity, Ernst and Young LLP (EY), the council's external auditor, is expected to issue a disclaimed audit opinion for the 2024/25 statement of accounts, following a similar opinion for the 2023/24 accounts.
Without increased funding and a different policy approach from the government, maintaining financial sustainability beyond the short to medium-term will be very difficult, even with substantial cuts to important services.
The Audit Committee convened on Monday 30 June 2025, to discuss several key financial reports, including a Going Concern Assessment and the Draft Statement of Accounts for 2024/25. While the reports indicate that the council has sufficient resources to manage risks over the next 12-18 months, they also highlight the precarious nature of Newham's financial position in the long run.
According to the Going Concern Report, Newham expects to have enough resources to manage risks in the short-term, making it appropriate to prepare accounts on a 'going concern' basis. However, the report also cautions that the financial position remains challenging and unsustainable in the longer term,
echoing concerns about the pressures facing local authorities due to rising social care and housing costs.
The Treasury Management Year End Report further illustrates the financial pressures. As of 31 March 2025, the council's combined treasury portfolio was £1.324bn, including £80.6m in treasury principal investments and £1.405bn of debt. The council's investment priorities remain security, liquidity, and then yield. As of March 31, 2025, 100% of investments were either with other local authorities or the Debt Management Office.
During 2024-25 Public Works Loan Board (PWLB) rates rose sharply in line with gilt yields, which rose due to inflation and fiscal concerns. Rates climbed steadily from around 5% in April 2024, peaking in early January 2025. After January, shorter-term PWLB rates fell significantly, while longer-term rates remained elevated. Overall, PWLB rates stayed higher than at the start of the period, maintaining elevated borrowing costs. The current treasury strategy remains keeping investments short, deferring long term borrowing but having regard to interest rate forecasts. A floor of £50m was set on investment balances as a liquidity buffer. Officers will, within current risk parameters, seek to optimise yield on the Council's investments so as to reduce the impact on the General Fund. Non treasury loans to wholly owned bodies are detailed in Appendix 2 - External Credit loans and equity 31.03.25.
As mentioned in the 2025/26 approved TMSS, the Council has an investment programme that extends beyond the capital programme in the MTFS. The future borrowing plans of the major self-financing schemes will be determined at various stages by Cabinet according to the business case and prevailing economic circumstances. The TM mid-year review later this year will seek to forecast when these major projects are planned to enter the capital programme. These projects are supported by a robust business plan and are self-financing over their lifetime. Of the loans detailed in table 4: new long term borrowing, 6 are Equal Instalment of Principal (EIP) loans and 10 are Maturity loans. All are set to mature by 2040.
The Council's budget setting process began earlier than in previous year with an October Cabinet setting out MTFS savings options for the next three years and the budget setting process which followed was supported with robust challenge sessions with independent experts, led by Rob Whiteman, Chair of Newham's Transformation and Improvement Board. Through this process, the Council was able to identify £57 million savings in its 2025/26 Budget Plan which was approved by Full Council on 27 February. This is in addition to the £23 million of efficiencies from our Transforming Newham for the Future Programme as well as a council tax increase of 8.99%, following agreement from government to lift our council tax referendum threshold to 9% in recognition of the council's financial position and comparatively low council tax levels. In February 2024, Government announced that Newham Council would receive Exceptional Financial Support. This will allow us to cover £51.2 million in 2025/26 and £16 million in 2024/25 of our revenue expenditure from the sale of council assets. The Council has also undertaken a comprehensive update of the Housing Revenue Account (HRA) Business Plan for the Council. In October 2024, Cabinet approved the updated 30-year Business Plan, which reflected a refocus on the HRA towards improving housing stock repairs, maintenance, retrofit and a slight re-balancing towards new home acquisition as opposed to home construction.
The Value for Money (VFM) Base Budgeting exercise remains a priority for officers so that information on budgets, outcomes, and benchmarking can be triangulated to identify how and where spending provides value for money in line with the Building a Fairer Newham outcome requirements and corporate strategies (and consequently what should either be invested in or should be de-prioritised). Following Phase 1 of the Disposals Programme officers have continued the review of all Council property investments and land holdings to identify assets that may be suitable for disposal, with those assets presented in this report being the second phase. In February 2025, Cabinet agreed the Asset Strategy for 2024-2027, which sets out how the Council will deliver value for money and provide the greatest possible benefit for communities through the changing demands, macro and micro economic influences that Newham, and all local authorities, are facing. Phase 2 of the disposals programme was agreed by Cabinet in May 2025. The target receipt for Phase 2 to be achieved during fiscal year 2025/26 is £51.2 million. Phase 2 of the disposals programme was developed through an Asset Review Group with input from all directorates. Moreover, a long-term capital strategy has been partially informed by this work as well as including required decisions on prioritising non-property investments, determining appropriate expenditure levels, and shaping the Council's treasury strategy to minimise borrowing costs and risks. This includes optimising the balance between fixed and index-linked debt (e.g., long-term index-linked leases) and recycling low-interest PWLB loans. For the medium term, decisions on disposals was agreed by Cabinet in May 2025. In February 2025 the Council agreed a budget for the year 2025/26 with a net budget requirement of £496m. Budgeted revenue income for the year totals £440m, which leaves a £56m funding gap. £10m of this will be met through the permitted 'Flexible Use of Capital Receipts' specifically to fund the Council's transformation programme, and £46m will be met from a more general use of capital receipts under EFS.
The Draft External Audit report identifies significant risk areas and the auditors' approach to their review work.