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Exceptional financial support (EFS) was born of pragmatism. Faced with the prospect of multiple councils issuing section 114 notices, government used it to keep services running and budgets technically balanced.In that narrow sense, EFS has worked. It has prevented more serious financial failure and bought time for councils facing extraordinary pressures. But buying time is not the same as restoring financial sustainability.For 2026-27, government agreed around £1.5bn of support, with 36 councils permitted to use capital receipts or borrowing to support revenue budgets. Thirty-three have social care responsibilities, meaning more than one in five social care authorities required a significant relaxation of the normal financial framework simply to set a balanced budget.Using capital resources to fund ongoing expenditure is not sustainable. Borrowing transfers today's pressures into future budgets and adds financing costs. Asset sales reduce councils' capacity to invest in infrastructure, transformation and growth.EFS has clearly become less exceptional. The Chartered Institute of Public Finance and Accountancy's (CIPFA) reviews of councils receiving support show that recent cases are increasingly shaped not by isolated commercial or governance failures, but by a common combination of social care demand, homelessness, special educational needs and disabilities (SEND), depleted reserves and structural funding pressures. A mechanism designed for exceptional local circumstances cannot, on its own, resolve a system-wide problem.None of this diagnosis is new. Much has already been written about why EFS is undesirable and why repeated reliance on it is unsustainable. The more useful question now is how EFS can become a bridge back to sustainability and what that means for individual councils, for government and the sector.Councils must continue to pursue efficiencies, modernise services and maintain robust financial management. Some authorities still need stronger governance, better financial controls and more credible savings plans. All such plans must be tested for deliverability, service consequences and their effect on future demand. Optimistic, back-loaded plans should not qualify as recovery.Capital flexibility should support restructuring only where it produces a clear and measurable return. Benefits should be tracked after implementation, while asset disposals should form part of a strategic asset plan, not a short-term search for receipts to close the next budget gap.Prevention and stronger demand management can improve outcomes and reduce long-term costs, particularly in social care, homelessness and children's services.But prevention requires sustained investment before benefits emerge. Recovery plans should protect well-evidenced preventative activity, rather than reward cuts that improve next year's budget while increasing future demand.It would be unrealistic to suggest that dozens of councils can transform their way out of demand and the cost pressures that sit largely beyond their direct control. Plans should distinguish between what local management can control and what requires national reform.Government must turn EFS into a managed recovery regime rather than a series of annual decisions. Multi-year agreements could provide a clearer planning horizon, but continued support should depend on delivery.The Government should publish consistent entry and exit criteria, require comparable reporting and distinguish between temporary liquidity problems, locally remediable failures and structural funding gaps. That would clarify which problems councils must fix and which ministers must address.This is in progress. Recent funding reforms have moved resources closer to assessed need, although redistribution will always create difficult choices.The commitment to fund 90% of legacy SEND deficits addressed an immediate threat for many authorities. But neither change eliminates continuing growth in demand and cost.The experience of Dedicated Schools Grant deficits is instructive. What began as a pragmatic response became a multi-billion-pound problem because the underlying system remained unreformed.EFS risks the same trajectory if temporary flexibility becomes embedded while recurring pressures continue.A sustainable exit therefore requires policy reform alongside local recovery. Adult social care, SEND and temporary accommodation are national systems whose costs land heavily in local budgets.Government should assess policy across departmental boundaries so that savings in one place are not merely transferred to councils elsewhere. Where national policy creates an unavoidable pressure, funding and accountability should follow it.The current limbo around local government reorganisation adds a further layer of uncertainty. If timetables change or implementation is delayed, authorities may find themselves responsible for budgets that were built on very different assumptions, raising the spectre of new EFS requests.EFS has prevented serious disruption and may remain necessary. The test now is whether every use of it buys genuine recovery rather than another year of managed decline.The route out requires a practical compact: realistic local baselines, recovery plans with tangible progress measures, earlier sector-led intervention, disciplined use of capital flexibility and national reform of pressures that councils simply cannot resolve alone.EFS needs to become a bridge back to sustainability. Councils should produce credible plans for crossing it, but government must ensure there is firm ground on the other side.Owen Mapley is chief executive of the Chartered Institute of Public Finance and Accountancy (CIPFA)

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FINANCE

The route out of EFS

By Owen Mapley | 15 October 2026

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