£360m coronavirus financial blackhole for Yorkshire's councils, data reveals

In the worst case scenario, Yorkshire’s local authorities will be left with £364.2m in unmet costs, with a best case scenario still seeing a £282.7m shortfall in funds.

The data, obtained by the BBC, comes after research by thinktank the Centre for Progressive Policy which showed eight out of 10 councils were looking at effective bankruptcy despite Government support during the coronavirus crisis.

One of the country’s largest local authorities, Leeds, may have to issue a Section 114 notice, which bans all new spending and effectively declares the council’s coffers are empty.

While in the East Riding, local leaders have called an emergency budget meeting for next month.

Professor Alistair Jones, Associate Politics Professor at the Local Governance Research Centre, De Montfort University in Leicester, said a section 114 is a council saying “we seem to be - or have already - run out of money”.

Councils in Yorkshire have received £287.48m in support from Government so far, with £3.2bn being handed out nationally.

But ministers are being asked to go further, with Leeds specifically asking for the Government to underwrite the shortfall in business rates and any drops in council tax.

They also called for Public Works Loan Board debt held by local authorities to be written off, or the interest rates reduced.

The city’s council had the fourth worst predicted shortfall in the country at £60.6m this year.

Some of the region’s councils will be able to dip into reserves to cover costs, but others cannot.

A spokesman for Calderdale Council said: “If the Government does not fully compensate the Council we will need to identify savings in-year, as we do not have sufficient reserves to meet these costs.”

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

“This is part of a wider package of support from across government for local communities and businesses – totalling over £27bn - including grants, business rate relief and for local transport.

“We are working on a comprehensive plan to ensure councils’ financial sustainability over the financial year ahead – we will continue to work closely with them to ensure they are managing their costs and we have a collective understanding of the costs they are facing.”

Yesterday, a Centre for Progressive Policy (CPP) warned the Government’s levelling up agenda will not be able to continue until councils are fully compensated for losses due to coronavirus.

The CPP found that despite emergency non-ringfenced Covid-19 funding, 131 upper tier councils out of 151 in England did not have sufficient funds to make up for projected increased costs and reduced income due to Covid-19. This includes 18 out of 19 of upper tier authorities which significantly feature former Red Wall constituencies.

The report said: “This will compound the effects of a decade of austerity.”

It also said deprivation and need should be criteria in distributing additional funds.

And it added: “As a result, the government needs to recommit to giving its full financial support to councils for Covid-19 losses before it can return to the levelling up agenda.”