Big losses for District Councils as a result of coronavirus

The Local Government Chronicle has collected detailed breakdowns of the financial impact of the outbreak from 24 district councils. Although it is only a small proportion of England’s 189 districts, it includes councils from all parts of the country where there is two-tier local government and there is no suggestion the picture is not replicated nationwide.

Between them they reported forecast lost income of £260m for 2020-21 and additional cost pressures of £20m.

Some districts reported significant cost pressure in relation to homelessness. Councils were ordered by the government to bring all rough sleepers off the street and have also had to adapt provision of temporary accommodation, which often includes shared facilities, to ensure residents can practice social distancing.

Epsom & Ewell BC reported amongst the highest homelessness cost pressures of £840,000. However, this was dwarfed by £9.5m in lost income on fees and charges and £6m in lost commercial income from property.

North Devon said its costs related to the purchase of personal protective equipment for staff in services such as waste and recycling, and a crematorium as well as a video intercom for its customer services team so members can continue to speak to the homeless.

However, the council is also warning of potential loss of income of as much as £3.2m. Even if the council used all of its £1.3m unallocated reserves and an earmarked reserve of around £1m to be used in the event of volatility in business rates income it could not cover the shortfall.

A summary of the council’s financial position, shared with LGC, said: “Thus we would have to look into other earmarked reserves that are set up for future projects; the obvious impact of using these reserves will undoubtedly put the authority under severe financial pressure and question the ongoing viability of the council.”

Many councils also reported increased demand for council tax support schemes from residents whose income has been hit by the crisis.

This is not just an issue for district councils and could potentially have a long term impact on council tax collection if unemployment remains high.

In its return Warwick DC said reduced council tax income has cashflow implications for it in 2020-21 but this shortfall in income would need to be made up by precepting authorities, including Warwickshire CC county in 2021-22.

In its return, Kent CC warned of cost pressures of £99m and lost income of £19m, not including any impact from lost business rates or council tax income.

Sam Blakeman, research officer for the Special Interest Group of Municipal Authorities, told LGC lost income was “as much a problem as expenditure” for its members.

“We’d hopefully be looking for the Treasury to underwrite council tax and business rates”.

Ms Hines, who is executive director of resources at Nuneaton & Bedworth BC, told LGC the full impact of council tax and business rates would take a while to emerge.

“Whilst we have got some spend pressures including homeless pressures and contributing to setting up the shielding hub there by far and away the biggest pressure is lost income.

“We need commitment from the Treasury if we continue to provide evidence that we are experiencing these cost and income pressure they’ll keep reviewing it.”

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