The read in full

Every slide's text, as the read shows it. The charts, the live figures and the authority picker are in the read itself.

Introduction

Four numbers and a line

MHCLG has proposed four capital risk metrics for English councils, an outlier line for each, and a power to direct any authority that crosses one. This read explains the metrics, the line and the process, and scores your own authority against it.

4 metrics named in the Local Government Act 2003, s12B

Q3 + 2.5 × IQR the proposed outlier line, set each year from the sector

Live figures computed from the council dataset each time the read is opened

In one minute

The whole read, for anyone with a minute.

What. Four ratios built from returns councils already file: debt against spending, investment income against spending, the share of debt not owed to government, and how many years of MRP the General Fund debt represents.

The line. No fixed limits. For each metric and comparison group, the upper quartile plus two and a half times the interquartile range, recalculated each year on final outturn.

Then what. A breach is a trigger, not a verdict. Government would seek context first; it may then direct a borrowing limit, specified actions or the sale of a named asset, and commission an expert review.

Where it stands. The consultation ran from 28 May to 6 August 2026. As at 3 November 2026 no government response or regulations have been published. Nothing is yet in force.

This year. How many English principal authorities sit above the line on at least one metric, counted from the latest final outturn when the read is opened.

Your authority. Slide 16 scores any English principal authority on all four metrics against the line for its own group, from the latest final outturn.

Why they exist

The councils that borrowed too far

Between 2018 and 2024 a handful of English councils borrowed on a scale far beyond their revenue budgets, to buy commercial property or to lend on. Several ended in section 114 notices and government intervention.

What went wrong

No rule was broken. The prudential framework left the judgement of affordability with each council. Woking, Thurrock, Slough, Croydon and Spelthorne each set their own limits and stayed inside them.

The numbers were public, and unused. Debt of ten or twenty times a council's net budget was visible in the outturn returns for years. Nothing in the statistics the government collected was used to say, early and in public, that an authority had moved a long way from its peers.

Intervention came late. Commissioners arrived after the section 114 notice, when the losses were already crystallising. The exceptional financial support that followed runs into billions.

The answer. The Levelling-up and Regeneration Act 2023 inserted sections 12A to 12D into the Local Government Act 2003. Section 12B names four "capital risk metrics". Breach a threshold on one of them, or issue a section 114 report, and the Secretary of State may act.

2026 The Act names the metrics but leaves the arithmetic, the thresholds and the process to regulations. MHCLG's consultation of 28 May to 6 August 2026 set out how it proposes to fill them in. That proposal is what this read describes.

What the Act now allows

Sections 12A to 12D of the Local Government Act 2003, in one view. The metrics are the trigger; the directions are the teeth.

Section 12B · the trigger. Four capital risk metrics Named in the Act, defined by regulations. An authority breaches a threshold set for one of them, or issues a section 114 report, or needs exceptional support to avoid one. Thresholds and comparison groups to be set in regulations

Section 12A · the power. Risk-mitigation directions The Secretary of State may set a borrowing limit, require specified actions, or require the authority to divest a named asset. Each must be appropriate and proportionate, with regard to services and the best value duty. Notice and a chance to make representations first

Sections 12C and 12D · the end. Review and cessation Section 12D allows an independent expert review the authority must cooperate with. Section 12C ends the arrangement by cessation notice once twelve months have passed and the risk has gone. Earliest cessation: twelve months after the direction

The section 114 route is independent of the metrics: a report under section 114 of the Local Government Finance Act 1988, or the need for exceptional support to avoid one, is a trigger in itself.

The four metrics

Metric 1: debt relative to resources

Is the capital debt out of proportion to the size of the authority?

CFR

Capital Financing Requirement at 31 March, from the Capital Outturn Return. The underlying need to borrow for capital purposes, whether or not the borrowing has yet been taken, and including PFI and leases.

TSE

Total Service Expenditure from the Revenue Outturn, line 699: what the authority spends running its services, before financing.

Compared with

District councils in two-tier areas against each other, everyone else together, and each of those split by whether the authority holds a Housing Revenue Account. Four groups.

What it catches

Capital debt that has grown far beyond the revenue base that services it. The CFR is used rather than actual borrowing because an authority can run its debt through internal borrowing and leases without a loan ever appearing.

Every authority in the group, lowest to highest,

Metric 2: investment income dependence

How much of the budget rests on commercial income?

Income

Revenue Outturn line 821, income from investments other than treasury management: rents from commercial property, dividends and interest from companies and loans to third parties. Collected since 2021/22.

TSE

Total Service Expenditure, line 699, as in metric 1.

Compared with

District councils against each other, everyone else together. Two groups. An authority with no commercial income scores 0% and stays in the comparison.

What it catches

Budgets that would not balance without the commercial portfolio performing. An earlier idea was to measure investment assets; the consultation settled on income instead, which the sector says flags success as well as risk.

Every authority in the group, lowest to highest,

Metric 3: non-government debt share

How much of the debt was lent by someone other than the state?

Gross debt

Borrowing plus other long-term liabilities at 31 March, from the Capital Outturn Return.

Lenders

The PWLB, central government and other local authorities, from the 31 March row of the quarterly borrowing and investment return. Short-term loans from other councils count too, taken at the same 31 March as the gross debt. What is left is banks, bond markets, private placements and LOBOs.

Compared with

All authorities in one group. An authority with no external debt has no share to score and is left out of this metric.

What it catches

Reliance on lenders the government does not control. Debt the PWLB did not advance is harder for government to see, carries call options and covenants, and cannot simply be refinanced at the PWLB if a lender steps away.

Every authority in the group, lowest to highest,

Metric 4: MRP adequacy

At the current pace of repayment, how long would the debt take to clear?

GF CFR

The Capital Financing Requirement less the share attributable to the Housing Revenue Account, from the capital return and its HRA supplement.

MRP

The minimum revenue provision charged in the year: the prudent amount set aside to repay debt. It is the single "Minimum Revenue Provision" line on the Capital Outturn Return, which should include MRP on PFI and leases. Capital receipts used to repay debt are not MRP. Voluntary contributions are excluded; the consultation asks whether they should count.

Compared with

All authorities in one group. An authority with nil or negative MRP has no ratio and is left out.

What it catches

Debt being repaid too slowly. A multiple of 50 means the provision would take fifty years to clear today's debt. Authorities with large HRAs read high if the HRA share is not stripped out, which is why it is.

Every authority in the group, lowest to highest,

Three design choices

Why the metrics look the way they do, and what follows from each choice.

Relative to the authority's own spending. Three of the four divide by Total Service Expenditure or the MRP charge, so a county with a £1bn budget and a district with a £15m budget are judged on the same footing. Size alone never flags an authority; proportion does.

Final outturn, a year in arrears. The figures are the returns councils file after the year end. A year is scored once both final returns are out: for 2025/26, the capital return in November 2026 and the certified revenue outturn in December 2026. Metric 3 is the exception: its quarterly return lets the share be watched in-year.

Tested against the sector, not against fixed limits. There is no number in the regulations to aim at. Each line is drawn from where the sector actually sits that year. An authority that stands still can cross the line if the sector deleverages, and one above it can be caught up by the rest.

Comparison groups follow from choice 1: districts in two-tier areas run a narrower set of services than unitaries and counties, so metrics 1 and 2 compare them with each other, and metric 1 separates authorities with housing stock from those without.

The outlier line

How the line is drawn

The consultation proposes no fixed numbers. For each metric and each comparison group, take the upper quartile of the group's values and add two and a half times the interquartile range. Anything above is an outlier.

Robust

Quartiles barely move when a few extreme authorities change, so one or two very indebted councils do not drag the line up for everyone else.

Wide

In a bell-shaped distribution a 2.5 × IQR fence would flag fewer than one authority in ten thousand. Sector ratios are skewed, with a long tail of highly geared councils, so a few dozen sit above a line each year.

Annual

Recalculated every year on the new final outturn. The line is a property of the sector that year, not a standard carried forward.

Try a different multiplier,

tighter wider

2.5 × IQR above the upper quartile

The lines this year

Computed from the latest final outturn for every English principal authority, exactly as the capital risk monitor draws them.

The line moves

Each year's line is set afresh from that year's outturn. Here is how the line and the median for the largest group have moved, metric by metric.

What happens next

If an authority is flagged

The consultation's proposed process, from the annual calculation to the end of a direction.

Calculation. Each year, once final outturn is published, the department calculates every authority's metrics on 31 March data for the previous financial year and sets the lines.

Context first. A breach does not of itself trigger a direction. Government would look at trends, the authority's wider position and local factors, and would ordinarily contact the authority for context, evidence or data corrections. Faster action is reserved for acute cases.

Notice and representations. Before any direction the authority is told what is proposed and may respond.

Direction. If the statutory conditions are met and a direction is appropriate and proportionate, the Secretary of State may impose a borrowing limit, require specified actions, or require divestment of a named asset. An independent expert review may be commissioned, and the authority must cooperate.

Cessation. A cessation notice ends the arrangement once at least twelve months have passed, directions are complied with or revoked, and no further direction is likely.

The consultation calls the first annual cycle a learning and data-improvement period, and says the thresholds and groupings would be reviewed in the light of it.

What the sector said

The Local Government Association's response, published in August 2026, and the themes that ran through the sector's replies.

Accepted. Most of the risks the consultation lists are real, and the sector has an interest in catching the next Woking early. Managing risk, though, is good practice; the LGA called avoiding it altogether "unrealistic and impractical".

Objected: metric 2. Measuring investment income rather than investment assets identifies councils whose investments have succeeded, not those with poor returns. The LGA warned the metric could "stifle innovation and local investment".

Asked for Local context before any direction, a role for the authority's own section 151 officer and external auditor, and clarity on how the metrics would work through local government reorganisation, when CFRs and service spend move between bodies.

Treasury advisers. Questions about the arithmetic: whether voluntary MRP should count in metric 4, whether LOBOs and bonds belong together in metric 3, and how the lines behave in a year when a few large authorities restate.

Where it stands now

As at 3 November 2026 the consultation has closed and no government response has been published. Nothing on these slides is yet in force.

26 October 2023. Levelling-up and Regeneration Act inserts s12A to 12D into the Local Government Act 2003

28 May 2026. MHCLG consultation opens: metric definitions, the outlier line, the process

6 August 2026. Consultation closes. LGA and sector responses published

Awaited. Government response, then regulations setting the calculations and thresholds, and technical guidance

First cycle. A first annual calculation the consultation calls a learning and data-improvement period. No commencement date given

Proposal. Until regulations are made, the figures on PWLBtoday are a computation of a proposal, not a measure with legal effect. The comparison groups, the 2.5 multiplier and the treatment of voluntary MRP may yet change. The data behind the monitor refreshes with each MHCLG release regardless.

Your authority

Your authority against the line

Pick an English principal authority to see its four metrics for the latest final outturn, each against the line for its own comparison group.

Open on the capital risk monitor →. Council profile →

Using the capital risk monitor

The read ends here; the numbers carry on. Two pages on PWLBtoday compute all of this live for every English principal authority, back to 2017/18.

Capital risk monitor. All four metrics, every authority, every year

The line for each authority's own group, and where it sits among all authorities, similar ones or its nearest neighbours.

Its history against a moving line, and the authorities above the line this year.

A quarterly view of metric 3 that runs ahead of the annual outturn.

Council profile. The same tiles, in context

The four capital risk tiles beside the authority's benchmark ratios: debt, interest and reserves against net revenue, and debt maturing within a year.

The borrowing book by lender and the PWLB maturity ladder.

The latest PWLBintel on the authority, on one printable page.

Data: MHCLG Revenue Outturn, Capital Outturn Returns and the borrowing and investment live tables, rebuilt into one dataset by PWLBtoday and refreshed with each release. Scotland and Wales are in the dataset but outside the scope of the proposed metrics, so they are benchmarked and not scored.

Close

Sources and method

MHCLG, Capital risk metrics: implementation and mitigation measures, consultation, 28 May to 6 August 2026

Local Government Act 2003, sections 12A to 12D (inserted by the Levelling-up and Regeneration Act 2023, section 80)

Local Government Association, response to the consultation, August 2026

MHCLG, Local authority revenue expenditure and financing (Revenue Outturn)

MHCLG, Local authority capital expenditure and receipts (Capital Outturn Return)

MHCLG, Local authority borrowing and investment live tables

Method. Every figure in this read is computed by PWLBtoday from the returns above, using the consultation's definitions: CFR and Total Service Expenditure from the capital and revenue outturn, investment income from Revenue Outturn line 821, gross debt and the lender split from the capital return and the 31 March borrowing return, General Fund CFR as total CFR less the HRA share. Lines are the upper quartile plus 2.5 times the interquartile range of each comparison group, on the latest final outturn. English principal authorities only. The figures move with each MHCLG release; the words are as at 3 November 2026. Nothing here is advice.