Auditors Warn Tower Hamlets’ Finances Are Deteriorating as Reading Forecasts Multi‑Million Overspend

Overview

• EY auditors told councillors this week that Tower Hamlets faces an expected £19.2 million overspend and identified weak budget‑setting and control that have produced a "deteriorating financial position".
• Most of Tower Hamlets’ extra spending is on non‑discretionary, demand‑led services such as adult and children’s social care and temporary accommodation for people who are homeless, which pushed unrestricted reserves down from about £55.5 million to £40.5 million last year.
• Reading Borough Council’s Quarter 1 report shows a forecast £5.334 million overspend driven by higher costs for children’s services and home‑to‑school transport after a rise in Education, Health and Care plans requiring transport.
• Councils are using ad hoc steps to manage gaps, including reserve drawdowns, tighter spending controls, and debt write‑offs in Reading, while London Councils warns the capital faces a collective £5.2 billion shortfall that has led some boroughs to seek emergency government loans or permission to raise council tax above limits.
• Auditors say these fixes do not solve structural funding shortfalls and that reduced reserves leave councils less able to absorb future shocks, a development that could mean service cuts, higher local charges, or calls for national policy change.