coronavirus funding gap rises to £7.4 billion

The financial impact of the coronavirus on local authority finances has risen by almost a fifth to £10.9bn in the space of a month, according to new figures from the Local Government Association.

An LGA analysis of last month’s council financial returns to the Ministry of Housing, Communities & Local Government found that the gap between the financial pressures caused by the pandemic and the emergency funding from Whitehall has grown to £7.4bn, up from at least £6bn in May.

It has sparked calls for the ministry to “urgently” release details of the comprehensive plan promised by communities secretary Robert Jenrick last month to “ensure [councils’] financial sustainability for the remainder of this year”.
Today’s LGA analysis of the June financial returns, completed by all councils, found that between March and June they incurred £4.8bn of extra cost pressures and income losses due to the pandemic, with £1.5bn blamed on loss of council tax and business rates income.

And it showed that the total financial pressure facing councils this financial year is forecast to hit £10.9bn, representing a £1.8bn increase on the May returns. This total was made up of £4.4bn of cost pressures, including £1.8bn pressures on adult social care, and £6.5bn in lost income, of which more than half (£3.7bn) results from loss of council tax and business rates.

The government has so far announced £3.2bn of emergency funding for councils, while clinical commissioning groups have provided £300m, leaving a projected funding gap of £7.4bn.

A number of councils have warned they may have to issue section 114 notices, effectively declaring themselves bankrupt, if they do not receive additional government support.

There has been speculation that the government may announce details of its plan this week, with Mr Jenrick due to address the virtual LGA conference tomorrow.
The LGA today urged the government to ensure its plan addresses three “key elements of the pressures facing councils”:

• All additional costs councils are set to incur result of the pandemic be met in full

• A guarantee that councils will be compensated for all lost income from fees and charges and other sources

• A solution to cover councils for losses of local taxation which will hit their council tax and business rates collection funds next year.

LGA chair James Jamieson (Con), said today’s analysis shows councils “continue to face unsustainable finance pressures”.

He added: “Councils have a legal duty to balance their budgets each year. Further funding and flexibilities are now urgent if councils are to have the certainty they need to avoid taking steps, such as in-year cuts to local services, to cope with funding shortfalls. We are already starting to see this being borne out in towns halls of all political colours across the country.”

From the Local Government Chronicle

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