Councils could need at least £6 billion more than current government emergency funding

The Local Government Association has said that the costs and losses of income in March, April and May are around £3.2 billion. This is the sum in the two tranches of emergency funding given to councils by the government thus far. But councils could need at least £6 billion more to cover the costs of coping with the coronavirus pandemic during this financial year.

However, the LGA say that even this figure will have to be kept under review because the Ministry of Housing Communities and Local Government survey assumes “a return to normal” in July.

“The financial impact of the crisis will continue to be felt into next year and beyond and any future package of funding measures from government will need to take this into account. The LGA is therefore commissioning independent analysis to project the potential impact of the COVID-19 crisis and the subsequent economic shifts on council budgets and this year and future years and to look at solutions that could help tackle this.”

There is no chance of a “return to normal”, even if we avoid a second wave which would require a return to a full lock-down. Revenue income is unlikely to return to pre-covid levels because economic activity will recover slowly. Moreover, with a large part of the population expressing a view that the easing of the lock-down is premature many people will be careful about what they do and where they go. For instance, losses of revenue from parking and leisure activities, will recover slowly. The impact of increased unemployment will on impact on economic activity and probably arrears of rent and council tax.

“Without certainty of further funding and flexibility around budget setting, the LGA said 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.”

Meanwhile the Local Government Chronicle reported that SIGOMA’s (Special Interest Group of Municipal Authorities) 47 members face of shortfall of more than £1 billion – the difference between what the government has given them and the expenditure and losses resulting from the lock-down. They have received £841 million of the £3.2 billion handed out in response to the pandemic.

However, eight of these councils have already used up all of their share, whilst the remainder forecast they will have done so by next month. Chair of SIGOMA Stephen Houghton said these figures showed a third tranche of emergency funding was “desperately required” if councils were not to issue section 114 notices in the near future, or make “significant cuts”.

Whilst the LGA is right to demand that the government should cover not only extra costs of dealing with the pandemic but the loss of income from the lock-down, debt cancellation is a necessary part a solution to the crisis. Cancellation of local authority debt held by the PWLB would provide councils with an extra £4.5 billion a year. In the absence of these two measures then a return to austerity will be inevitable. The social consequences will be disastrous as council services will be unable to cope with demands increased by the pandemic and its aftermath, and Councils will have have insufficient funds to deal with social needs.

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