Coronavirus bill for councils could last for several years, leaders warn

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Councils face a multi-billion pound black hole due to coronavirus, a new report has found.

The County Councils Network - which represents all 25 county councils and 11 county unitary authorities - commissioned the study which found all 39 of the county and unitary authorities included could use up their available reserves in 2021/22 to cover a funding shortfall of £2.5bn.

It discovered county authorities would be particularly vulnerable to the fiscal impacts of a second wave of coronavirus, should this happen later this year, and a further outbreak and lockdown could increase the funding shortfall they face to an estimated £4.5bn over the next two years.

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And that savings plans meant to ease already strained budgets would now not be possible due to the outbreak.

Carl Les. Photo: JPI MediaCarl Les. Photo: JPI Media
Carl Les. Photo: JPI Media

The report said: “Government COVID-19 support funding to date has reduced the funding gap, but has not been sufficient to fully close it.”

Some £3.2bn has already been handed to local authorities by the Government to help with their response, with £1.3bn of that going to the councils analysed in the report, but the report found further funding would be needed to prevent councils finding themselves in financial trouble.

Carl Les, finance spokesperson for the County Councils Network and leader of North Yorkshire County Council, said: “Councils across the country are grappling with increased cost pressures in adult social care and other core local services, whilst facing huge reductions in income due to the lockdown and the country entering a recession.

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“This research shows the challenges facing county authorities and the severity of the potential impact on councils’ sustainability and provides important insights to inform government policy.”

The study found county authorities face a funding shortfall in 2020/21 of £752m due to COVID-19, which could be as high as £1.3bn. However, in the event of a second wave of the pandemic later this year could cause this to rise to £1.9bn, with councils having to spend more on Coronavirus-related costs whilst losing income from services.

Due to this shortfall a significant number of county authorities could exhaust their reserves this year, meaning they could face in year cuts to services to prevent insolvency.

Plus lost council tax payments, business rates and legacy costs – such as continuing costs in adult social care - as a result of the pandemic could create an additional funding shortfall of £1.8bn, which could be as high as £2.6bn.

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Mr Les added: “Building on this evidence, we want to work with Government to develop a comprehensive plan to support councils over the coming months and years. We know ministers are alive to the challenge and hope this report is a valuable contribution to informing future interventions to support all councils.”

Minister for Local Government Simon Clarke said: "We’re giving councils an unprecedented package of support, including £3.2bn emergency funding, to tackle the pressures they have told us they’re facing.

“In total, the Government has provided over £27bn to support local councils, businesses and communities in fighting the pandemic, including £600m to help reduce the infection rate in care homes and £300m to support track and trace.

“We will continue to work closely with councils as they support their communities through this national emergency and we are working on a comprehensive plan to ensure councils’ financial sustainability over the coming year.”

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