In recent weeks there have been a whole range of estimates as to what the financial impact on local authorities is going to be from COVID-19. The Core Cities Group estimate that lockdown will impact upon their budgets by around £1bn this year alone, county councils about £2.5bn, with SIGOMA, London Treasurers, and district councils all estimating that it will take billions just to steady the ship.
In any other circumstances pretty much every s151 officer would be sat with a s114 report ready to sign what would effectively signal its bankruptcy. They would be thinking about what they would say to their leader, cabinet and council; the chief executive and management team; partners and contractors; and last but not least, the people they serve.
You could say that issuing the s114 is the easy part. The sums are pretty straightforward. When councils all set their budgets back in March, they had a plan. They had years of experience of managing their financial position. They understood their income and their costs, where they had service demands, where they needed to transform. They all knew what it was going to take to balance their budgets. A matter of weeks later all these plans are having to be radically rethought – and with such a huge change, issuing a s114 would be the appropriate response.
So, if we did issue a s114 what would happen next? Well you might start with reviewing every line of expenditure and only authorising spend on those things you are contractually committed to and focusing on trying to deliver statutory duties. If we were a private sector business, we would be compelled by the financial position to look at furloughing our staff. I estimate that the weekly bill for Government if we shut up shop in Newcastle would be about £2.7m, but a local authority shutting up shop is not an option, and nor would we want it to be. You could argue it is times like this that we come in to our own. We want to be at the forefront of helping our citizens, our business and partners through this but without the certainty of the support from Government this will be incredibly difficult.
The £3.2bn which has been promised by Government so far is somewhere between 25% and 30% of what local authorities estimate they need to deliver the additional responsibilities they have enthusiastically taken on and the full year impact of lockdown. The £18.6m we have received in Newcastle is equal to just under seven weeks of support we would receive as a private sector firm under the furlough scheme.
There has been discussion about why tranche one and tranche two of the Government support was distributed on a different basis. For me this only becomes an issue if there are no further tranches of support. We shouldn’t get distracted by the distribution of a finite pot of funds as we sometimes did when looking at the fair funding review. We should be looking for a solution that identifies what local authorities need to do and what the true costs are. We need to have a collective view about how much individual councils need for this phase and the next phase where we hopefully start the recovery.
The support we need can be a combination of additional funds distributed to local authorities as per the £3.2bn and Government underwriting risks. I don’t know the number of businesses that will not be in a position to pay their business rates in the current financial year just as I don’t know the number of people who will claim universal credit as a result of losing their jobs. However, if the Government gives an undertaking that they will fund the financial implications for each council from these and other emerging issues then I can better plan the council’s finances.
So instead of putting our energies into looking at how we would deliver on the impossible task of balancing this year’s budget alone, we need to stand shoulder to shoulder with Government and trust that the original commitment to ‘whatever it takes’ will stand. The Maori spiritual concept of whakapapa comes to mind. A long unbroken chain of humans standing arm in arm from the beginning of time to the end of eternity and the sun shines for just a moment on this, our time. It’s our obligation and responsibility to add to our legacy. Our first responsibility is to be a good ancestor.
Hopefully generations to come will look back on our efforts, how we worked together and think of us as having met the challenge.
Tony Kirkham is director of resources at Newcastle City Council