No council should go bust due to efforts to combat coronavirus

22 June 2020

As we approach the end of month three of the most acute phase of the coronavirus, huge uncertainties remain for councils at a time when funding clarity is being given to other parts of the public realm.

That is not to say we are being ignored by the government. We are not! Ministers have made available £3.2bn so far for councils; a colossal amount in isolation but unfortunately the reality is that it will not be enough to address our coronavirus costs by the end of July.

Equally, a Treasury headed up by someone as astute and evidence-driven as Rishi Sunak is never going to accept ‘blank cheque’ requests so it was in this spirit that the County Councils Network commissioned Grant Thornton to carry out a robust analysis of the financial challenges facing councils, based on their Delta returns in May.

These were put through a number of possible future scenarios, with the best-case outcome for the 39 shire counties a £752m gap due to coronavirus costs for the remainder of the year (factoring in the government funding), rising to £2.5bn by the end of 2022 once lost income in council tax and business rates is factored in.

The worst-case scenario shows how councils will be left vulnerable to a second lockdown if there is another wave of the virus: with the total cost potentially rising to £4.5bn by the end of 2022.

To alleviate this, we will have little option but to use up our reserves – but counties already have some of the lowest stock, and many of these reserves are earmarked for priorities tied in to the levelling up agenda and to improve our residents’ lives and opportunities.

Grant Thornton predicts that all 39 counties would have used up their reserves by 2022, leaving some unable to balance their budgets.

No council should go insolvent due to their heroic efforts in combating coronavirus – and it would be a public disaster. We are confident a rescue package, particularly for lost income, is on the horizon. We hope this work helps to inform the scale of that intervention.

Cllr Carl Les is finance spokesperson for the County Councils Network

Counties could be forced to issue Section 114 notices this year

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