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Councils stare at huge losses from virus


26 June 2020

More local authorities have revealed the size of the funding pressures they are facing because of Covid-19. 

London boroughs are projecting additional spend and income loss of £1.8bn in 2020/21 (additional spend £709m and lost income £1.1bn). Taking into account Government grant payments, the funding shortfall estimated by boroughs is £1.3bn. 

The London Borough of Merton’s estimate of the net cost to the council is £35m after Government support and including a shortfall in council tax and business rates. 

The London Borough of Redbridge this week wrote to communities and local government secretary Robert Jenrick requesting more Government support. “The Government has compensated Redbridge Council just £15.7m and we have received no commitment from the Government that we will receive any additional funding to bridge the forecast £45m shortfall this financial year,” it said.

Bath and North East Somerset is predicting a deficit in 2020/21 of £43.2m, after taking account of the £10m it has received from the Government. “We are facing a ‘double whammy’ – increased costs and drastically reduced income due to the collapse of our visitor economy,” says the council’s position statement. “We have the highest dependency on income from things such as heritage services of any of our neighbouring councils.”

Birmingham City Council is projecting a shortfall of about £115m in 2020/21, after taking into account the £70.3m it has received from Government.  The council is predicting a further shortfall of £87m in 2021/22. 

Cornwall Council is citing costs of £45.2m against Government support of £34.4m, leaving a shortfall of £10.8m. 

“The council’s financial position is currently unstable, but our cash and reserves position are strong, which gives us resilience in the short-term. We are, however, a large council and the longer-term financial impacts will be equally large,” said chief executive Kate Kennally.  

Cumbria County Council’s estimate is £47.3m against Government grant of £25.2m. This excludes reductions in council tax and business rates as these are collected by district councils.

Isle of Wight Council estimates a shortfall of £9.8m in 2020/21 (including lower council tax and business rate revenues) after taking into account the £9.0m of emergency funding received from the Government.  

Nottingham City Council has received about £20m from the Government. “This funding is clearly insufficient and our ability to deliver even basic levels of resilience and public services is being undermined by increased service demand and reduced income as a direct result of Covid-19,” Theresa Channell, the council’s head of strategic finance, told councillors. “The council does not have sufficient reserves to deal with a financial impact of this scale and more Government funding to meet the additional costs is essential both in the current year and in the settlements for further years.”

Oxfordshire County Council is estimating a shortfall of £37.3m in 2020/21, based on costs/income loss of £64.6m and Government grant of £27.2m. 

“There is also an anticipated impact into 2021/22 due to reduced income from council tax and business rates as well as a potential on-going increase in demand relating to homelessness and the ongoing impact of any savings planned for 2020/21 which are not delivered,” said chief executive Yvonne Rees.

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