Apr 20th, 15:49
Blog 20th April 2020
In this blog, I discuss the impact of the coronavirus outbreak on the finances of local government and the additional funding provided by the Ministry of Housing, Communities & Local Government (MHCLG). I refer to: Local Government Association (LGA); Islington Borough Council; Boris Johnson; County Councils Network (CCN); Robert Jenrick; Chartered Institute of Public Finance & Accountancy (CIPFA); Rob Whiteman; Local Authority Housing Finance; and webinars.
The focus of our attention during this outbreak of coronavirus is obviously on the shocking numbers of deaths that are occurring in hospitals, care homes and communities in all parts of Britain and around the world. If any reader of this blog has suffered a bereavement or is worrying about someone close to them, please accept my sympathies.
The scale of the impact of coronavirus on the finances of local authorities became evident last week. Councils reported that the costs of providing extra services because of the coronavirus outbreak, including social care and housing rough sleepers, coupled with reduced income from council tax, leisure fees and parking charges were putting serious strains on their finances. Pressure on adult social care services is discussed in my blog of 8th April (click here to see the blog).
Expenditure on fees to care providers alone has increased by 10% at a cost of about £1billion meaning that local authorities have already spent the £1.6billion of additional funding provided by government as discussed in my blog of 23rd March (click here to see the blog).
Some councils have seen up to 20% of council tax direct debits cancelled during the first half of April. The Local Government Association said that:
“This is a clear signal that income from council tax will be reduced sharply this year, with no guarantee that this can be recovered in future years.”
Council Tax receipts are down
Islington Borough Council, for example, estimates that it has spent an extra £5.4million since the start of the crisis on additional social care services, emergency food and medicine, and business support, while losing £8.4million in council tax, parking and other revenues. Councillor Richard Watts, the Leader of the Council wrote to Boris Johnson, the Prime Minister, that:
“We simply cannot continue to deliver the vital services local people need and deserve without adequate additional funding from the government.”
The Local Government Association wrote to Robert Jenrick, the Secretary of State for Housing, Communities & Local Government to as for cast-iron guarantees that the government would continue to support councils financially and to warn that some authorities were nervous about continuing to maintain existing high levels of spending without such guarantees from government. They revealed that some councils were preparing to issue a Section 114 insolvency notice and impose extreme cost-cutting and rationing measures to stay within budgets.
And the County Councils Network has written to ministers to say that:
“The scale of the financial liabilities and our ability to manage these in the short to medium term is now becoming a real and pressing concern for all our member councils and their district and borough authorities. Many will be left facing severe cashflow and liquidity issues… No council should become insolvent as a result of the heroic efforts being undertaken across the country to support government at a time of national emergency”.
In response to this, Robert Jenrick announced that a further £1.6billion of funding would be made available. This takes the total given to councils to help their communities through this crisis to over £3.2billion. The government considers that funding will mean councils can continue to provide essential services and support to those who need it most; including getting rough sleepers off the street, supporting new shielding programmes for clinically extremely vulnerable people and assistance for the public health workforce and fire and rescue services; and will also mean that councils can provide vital services including adult social care and children’s services.
Robert Jenrick said that:
“I promised local government would have the resources they need to meet this challenge and today demonstrates my commitment to doing just that… We stand shoulder to shoulder with local government and my priority is to make sure they are supported so they can continue to support their communities through this challenging time.”
Councillor James Jamieson (Conservative), Chair of the Local Government Association, said that:
“It is… reassuring that the secretary of state has reiterated his promise today that councils will get all the resources they will need to cope with this pandemic. This commitment needs to be rock solid and consistent so councils can stay focused on leading the local response to the greatest challenge we have faced as a nation for decades.”
Councillor David Williams (Conservative), Chair of the County Councils Network said that:
“Councils have made a hugely significant contribution to the national and local effort to fight coronavirus and to support their residents, but increasingly we have had very real concerns that the money allocated for outbreak-related costs is not sufficient, with local authorities experiencing real cashflow and budgetary issues… We do not know how long the outbreak will last for, so the financial situation for councils must be kept under review, alongside a commitment to underwrite lost income from council tax… Coronavirus poses both short- and long-term challenges for our places… Councils will have a huge role to play in helping our communities and businesses back on to their feet, but we will need to be adequately resourced to do so.”
Rob Whiteman, the Chief Executive of the Chartered Institute of Public Finance and Accountancy, said that:
“Today’s welcome news is a step in the right direction, but more will be needed to ensure councils can maintain services in areas such as adult social care, homelessness and for other vulnerable groups.”
It appears to me that local authorities will need further financial support during the coronavirus pandemic. They will also require financial support when the pandemic is over so that they can re-start local economies as I discussed in my blog of 15th April (click here to see the blog).
Council Flats in Wigan, Greater Manchester.
Last week, we published two new briefing papers. To view or download them, please click the links below:
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