The Government has approved a request from Southampton City Council to extend the cash-strapped local authority’s exceptional financial support package.

The council was given special flexibility in 2024/25 to use capital resources through borrowing to cover revenue costs when it was on the brink of financial collapse.

A capitalisation directive for up to £121.6million was needed to set a balanced budget, fund the transformation programme, pay any subsequent redundancy costs, settle an equal pay claim liability and cover any potential unforeseen events.

The council had earmarked some £52m for the equal pay claim.

While the Labour-run authority has been able to propose a balanced budget for 2025/26 using its own resources, civic leaders asked to carry the flexibility over into the new financial year for costs related to the ongoing equal pay negotiations, transformation and redundancies.

Across England, 30 local authorities have been given support to manage financial pressures in 2025/26, it was announced on Thursday, February 20.

The Ministry of Housing, Communities and Local Government said Southampton City Council had in-principle approval for a revised £89.9million of exceptional financial support.

It was confirmed this was not additional resources from what was available for 2024/25.

Speaking at an overview and scrutiny management committee meeting on Thursday, deputy leader and cabinet member for finance Cllr Simon Letts said: “We have been granted an extension to our exceptional financial support.

“That does not mean we will require any further borrowing or money.

“It does mean that we can spend the resource that we have been allocated over two financial years, which is extremely useful to us because it allows us to effectively rollout the transformation programme in an organised and rational way.

“It also means that we can settle some of the outstanding issues, including equal pay, which is still under negotiation but it is a burden to the city.

“ I think the burden from my team’s perspective is the fact we don’t know what the number is.

“We would like to know so we can put it in the accounts and then move on.”

Cllr Letts said the council was in the final stages of negotiations on the equal pay matter, which relates to different working practices being in place across the authority for a number of years.

“We have put some offers forward and we are waiting for a final response,” Cllr Letts said.

The original exceptional financial support package allowed for up to £52million to be borrowed to cover the claim.

At the time of publication, the council was not able to confirm the breakdown of the revised £89.9million package for 2025/26 or what revisions had been made from the £121.6million allocation for 2024/25.

Latest projections suggest the council will only need to borrow around half of £39.3million initially allocated to balance the current year’s budget.