Clobbered by COVID

By Cllr Richard Watts | 17 June 2020

It is councils who have led local communities across the country through the coronavirus crisis. They created new services to support vulnerable people, ensured schools were open for vulnerable children and those of key workers, helped most rough sleepers into safe accommodation, and ensured almost all kerbside waste and recycling collections continued as usual.

As they continue to work day and night to protect the most at risk, support local businesses and bring together communities, many councils have seen increased cost and demand pressures due to the pandemic, while at the same time experiencing a significant drop in income.

The early payment of some grants by the Government and deferring payment of business rates by councils to the Treasury has helped with immediate cashflow issues. The £3.2bn of emergency funding provided by Government so far has helped meet the financial impact of COVID-19 over the past three months.

The Government initially promised that councils would get all the resources they needed to cope with this pandemic. Our analysis of the May financial returns to the Ministry of Housing, Communities and Local Government (MHCLG), shows councils could need as much as £6bn more to cover the costs of managing the coronavirus pandemic.

Based on the Local Government Association’s (LGA) analysis of the latest returns, almost two-thirds of further funding needed would be to cover lost tax income (council tax and business rates) and non-tax income (mostly sales, fees and charges). The rest would be necessary to cover extra cost pressures due to the pandemic.

However, councils desperately need the certainty of further funding. Financial freedoms and flexibilities are required, alongside the ability for councils to access short-term Public Works Loan Board loans to ease the immediate cashflow pressures they face and avoid some councils turning to short-term loans at expensive rates that would divert vital resources away from the services communities are relying on to get through this pandemic.

We have also been clear that the Government needs to delay repayments by councils on all new and existing loans.

Without further funding and financial flexibilities, many councils will have to take measures in anticipation of future funding shortfalls. This could mean in-year cuts to vital local services that are supporting communities through this crisis and the national effort to beat this deadly disease.

We are already starting to see this being borne out in towns halls of all political colours across the country.

Wiltshire Council has warned of a £50m funding gap this year due to COVID-19 – 15% of its net budget. Stevenage BC held an emergency budget, having received half of the funding it needs so far to meet pressures it has identified this year.

Manchester City Council is gearing up for its own emergency budget next month, while Luton Council has started seeking views from its residents on how to make in-year savings that might be needed as a result of the pandemic.

Norfolk CC has warned budget pressures from COVID-19 are set to increase the authority’s £38.9m budget gap next year, while Leicestershire CC wrote to its local MPs last month for help to secure its financial sustainability.

All of this is a distraction from the vital role councils are playing in leading communities through this crisis and supporting national efforts to beat this disease.

Councils are preparing to submit the next set of detailed financial returns to the MHCLG, which deserves credit for showing a commitment to fully understanding the financial pressures councils are facing as a result of COVID-19.

This cannot, however, just be a tick-box exercise for Government. Within those spreadsheets is robust evidence of a looming financial crisis that cannot be ignored.

Only with ongoing and consistent funding in the weeks and months ahead can councils keep supporting communities, local economies, the care sector and health service during the COVID-19 crisis.

The scale of the economic, environmental and community challenges that we will face should not be underestimated. It is vital that councils can support the economic recovery as emergency measures are lifted and we come through this crisis. This is crucial if we are to ensure that all communities can contribute to, and benefit from, this recovery.

Cllr Richard Watts is chair of the Local Government Association’s Resources Board

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