Local authorities face £405m financial threat as a result of Covid
The Covid-19 lockdown has added more than £400m to the budget deficits of Yorkshire councils, TheBusinessDesk.com can reveal.
Predicted deficits range in size from £14.5m in Harrogate to £117.8m in Leeds.
The figures were revealed in response to questions from TheBusinessDesk.com. There are concerns across local government that they do not have sufficient resources to continue to deliver the current level of services – which have already been subject to a decade of cuts.
Leeds City Council has gone public on the depth of its problems and a report to Leeds City Council’s executive board yesterday raised the possibility of a Section 114 report being issued.
A section 114 report is a notice which stops any new expenditure by the council, other than that required to safeguard vulnerable people, statutory services or existing legal agreements.
However, Yorkshire councils are not alone. Over the Pennines in Liverpool, city mayor Joe Anderson touted that the city council “could be declared bankrupt” due to being “on the verge of not being able to pay for services” back in April, and Manchester has also warned this week about the parlous state of its finances.
The Local Government Association (LGA) estimates nationally councils will face a reduction in income and increases in spending amounting to over £9bn in 2020–21.
The impact on council budgets however will go beyond this financial year. Sheffield city council has highlighted that it anticipates a £27m future loss of council tax and business rate income.
This supports findings by Institute for Fiscal Studies, which suggest that the financial challenges for local authorities are only likely to grow.
In a recent report it called on the government to either temporarily easy rules which prevent councils “from borrowing to cover day-to-day spending” or “provide more funding to the sector as a whole”.
Stating that “if the government will not cover the full costs local authorities are incurring as a result of the impacts of and their responses to the coronavirus crisis, there is a strong case to give them the financial flexibility to do so themselves.”
What do the politicians say…
Cllr Susan Hinchcliffe, leader of Bradford Council, said: “These are unprecedented times where extraordinary costs have been incurred keeping our staff and public safe.
“Whilst we are grateful for the funding provided so far by government, this is clearly nowhere near enough to cover the financial gap we have in this current year.
“We’re calling on government to fully compensate councils for these costs; we are at the frontline of keeping our communities going in these difficult times and the government needs to acknowledge that contribution. I’ll be working alongside other local government leaders of all parties to make this case nationally.”
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Cllr Richard Cooper, leader of Harrogate Borough Council, had emphasised the cost savings the council has made over recent years with a new civic centre and reduction in the number of councillors by over a third. He said: “We mended the roof while the sun shone paying off the historic debt left to us by previous councils. So we have reduced costs, reduced debt and increased income. All of this and more means that we are in a relatively strong financial position.
“Even so, our cash flow has been hit hard and it is difficult to know the long-term impact of that. At the moment we estimate we will be operating at around a £14m shortfall but this depends on when we can get the convention centre and our pools and gyms up and running. What I can say though is that we will continue to prioritise spending on front line services, on our retail centres, on community facilities, on the homeless and those at risk of homelessness and on supporting the voluntary organisations that make our area the special place it is.”
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Cllr Sir Steve Houghton CBE, leader of Barnsley Council, said: “We could never have imagined, or fully planned, for how the coronavirus (COVID-19) pandemic has affected our borough.
“The additional cost of dealing with the Coronavirus (COVID-19) pandemic and maintaining critical services far exceeds the £18 million government funding we’ve received to date.
“One positive is that we have an excellent track record for sound financial management, and we came into the new financial year with a positive outlook. We’re continuously looking at the council’s financial position as the data is frequently changing, but it’s clear that this is a significant challenge for us, and it will have an immediate impact, as well as in years to come.
“We have to make difficult decisions about how we deliver our services, but our aim is always to keep critical services running for our residents while protecting the most vulnerable in our society. These are not easy decisions to make, and we understand from the previous years of austerity measures, the effect that this has on our residents.
“It’s a challenging position to be in, and we’ll be planning how we manage our budget deficit over the coming months.”
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Cllr Keith Aspden, leader of City of York Council, said: “City of York Council acted swiftly in response to the outbreak of coronavirus, immediately targeting support to vulnerable residents across the city and creating local emergency funds, totalling over £2 million, to support businesses and residents who fell outside of government support schemes.
However, by scaling up the support on offer to residents, businesses and communities, the Council has inevitably incurred significant financial cost, including lost income, like many other businesses and local authorities across the country. In York, we have forecast a budget gap of £24m. That is why, with other councils, we have been working with our partners, including the LGA, to lobby for the resources and greater financial support to enable us to give more support to local businesses and residents.”
“Looking forward, we remain focused on progressing our recovery and renewal strategy, in order to support the wider re-opening of the economy, whilst ensuring residents and visitors are safe. We are continuing to press the government for additional funding for the Council, and we are also working with our partners to secure additional investment in the city by promoting the opportunities that are unique to York, such as York Central.”
“Of course, there are still many unknowns and the situation is very fluid, so our estimated budget gap at this stage is an indication of the financial impact. The Council will continue to review finances and there will be an update presented to the Executive again this week.”
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Cllr Judith Blake, leader of Leeds City Council, described the massive impact the virus has had on the city as something no one could plan for. Adding the pandemic “has left us facing a financial challenge of unprecedented proportions.
“Without urgent government support, there is a very real threat of big cuts to council services that many people take for granted.
“Over the last 10 years the council has managed to sensibly reduce spending in line with the budget cuts we have faced. Working with all our partners and the trade unions we were able to reduce the impact of cuts on the city, but the financial challenge posed by coronavirus is on a different scale altogether.”
