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Councils face £7.4bn COVID-19 funding gap, says LGA
Government support for councils during the coronavirus pandemic has fallen far short of what is needed, says the Local Government Association (LGA), as new analysis finds local authorities face costs totalling more than £10bn.
An analysis of returns completed by every council in England last month found that councils forecast a total financial hit of £10.9bn as a result of the COVID-19 crisis, well above the £3.2bn the government has provided in emergency funding.
This figure includes £4.4bn of additional coronavirus costs this year, including £1.8bn social care costs, and a predicted £6.5bn loss in income. It has also calculated a loss of £3.7bn in lost council tax and business rates income.
Between March and June, councils have already incurred £4.8bn in increased costs and income losses as a result of the COVID-19 pandemic. Loss of council tax and business rates income accounted for £1.5bn of this.
The government has so far provided local authorities with £3.2bn in emergency funding during the pandemic, however the LGA said councils are still facing a funding gap of £7.4bn if no more funding is provided.
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It is calling on the government to meet all additional costs councils are set to incur for the rest of the pandemic and guarantee that councils will be compensated for all lost income.
The LGA said the government will also need to provide a solution to cover councils for losses of local taxation which will hit authorities’ council tax and business rates collection funds next year.
Without this councils will have to take measures that could include cuts to vital local services that are supporting communities through the crisis, the LGA warns.
The LGA has published a new paper called Re-thinking Local that sets out how councils can be empowered to support the social and economic challenges faced as a result of COVID-19.
James Jamieson, chair of the LGA, said: “Councils are leading local communities through the coronavirus crisis. They continue to work all day and night to protect the most vulnerable, support local businesses and try and keep normal services running.
“As this new analysis shows, they continue to face unsustainable finance pressures. Not only do councils need to be fully funded to help our communities beat this virus now but also to help support the nation as we look towards the next phase.
“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.
“The government has shown a firm commitment to fully understanding the financial pressures councils are facing as a result of COVID-19 and we are pleased it is working on a comprehensive plan to address these this financial year. We urge the government to bring forward details as soon as possible.”
A Ministry for Housing, Communities and Local Government spokesperson said: “We’re giving councils unprecedented support during the pandemic as part of a £27 billion package for local communities and businesses to tackle the pressures they have told us they’re facing which is on top of increasing their spending power by over £2.9 billion this financial year.
“We will continue to work closely with councils as they support their communities through the pandemic and we will announce details of our comprehensive plan to ensure councils’ financial sustainability shortly.”
