£500m funding support for English councils

Coronavirus: Government will reimburse councils for lost car park income and allows extension of Council Tax and Business Rate deficits

Many local authority car parks have been closed during lockdown (Nick Fewings/Unsplash)

Many local authority car parks have been closed during lockdown (Nick Fewings/Unsplash)

The Government has announced £500m of support for English councils and a package of measures to mitigate the impact of lost income from charges such as car parks.

The Ministry of Housing, Communities and Local Government (MHCLG) says the £500m is unringfenced because that councils are best placed to decide how to meet pressures in their local area. The MHCLG said the £500m brings the total funding given to support local councils to £4.3bn.

Besides the funding, a new scheme will see central government reimburse councils for lost income from services such as car parks, and local authorities will be allow Council Tax and Business Rates deficits to be repaid over three years instead of one.

In addition to the new funding, the government said it would reimburse lost income during the pandemic and boost cash flow. Where losses are more than 5% of a council’s planned income from sales, fees and charges, the government will cover them for 75p in every pound lost.

Additionally, to enable councils to build breathing space into their budgets, the government is bringing in changes so that they can spread their Council Tax and Business Rate deficits over three years rather than the usual one.

The support package was announced by local government secretary Robert Jenrick on Thursday 2 July. “Councils are playing a huge part in supporting their communities during this pandemic,” he said. “From supporting the most vulnerable and keeping vital services running to operating local track & trace, council workers have been at the forefront of this great national effort and are the unsung heroes of this pandemic.

“Today I am providing a further package of support that takes our support for councils during this pandemic to £4.3bn to help meet the immediate pressures councils are facing. I know that the loss of revenue from car parks and leisure centres has created huge difficulties, so I am introducing a new scheme to help cover these losses.”

Recognising the impact the pandemic has had on councils’ income from car parks, museums and other cultural assets, the government is introducing a scheme to compensate them for these losses. This means that all relevant losses, over and above the first 5% of planned income from sales, fees and charges, will be compensated for at a rate of 75p in every pound thereafter. By introducing a 5% deductible the government said it is accounting for an acceptable level of volatility, whilst shielding authorities from the worst losses.

The MHCLG said this balances the need to provide compensation given the scale of the income losses, encouraging councils to manage and minimise loss where they can and giving them the certainty they need. In the next Spending Review, the government will agree an apportionment of irrecoverable Council Tax and Business Rates losses between central and local government for 2020 to 2021.

The local government secretary also announced a proposal for a phased repayment of council tax and business rates deficits over three years, rather than requiring complete repayment of deficits next year.  This will allow authorities to pay deficits off in a reasonable timescale and will limit their cashflow pressures.

Minister for regional growth and local government Simon Clarke MP added: “Since the start of this pandemic, local councils have been at the forefront of our national effort to tackle the virus, and they will continue to play a significant role as we look towards our recovery.

“We are more committed than ever to unite and level up this country and this package will ensure councils have access to vital, additional funding so they can continue to serve their communities as they so admirably have done to date.

“Beyond the support provided, any council that is faced with an unmanageable pressure or is concerned about their future financial position should contact the Ministry of Housing, Communities and Local Government.”

The Barnett formula will apply in the usual way to additional funding. The devolved administrations will therefore initially receive almost £100m in relation to this announcement. This comprises £50m for the Scottish Government, £30m for the Welsh Government and £15m for the Northern Ireland Executive.

The package follows the Prime Minister’s announcement on 1 July of the fast-tracking of £96m of investment through the Towns Fund to help revive activity in town centres and high streets, improve outdoor spaces, build cycle lanes and more. Some £360m will also be provided to redevelop brownfield sites to provide housing.

The MHCLG said that over the last six months, central government has provided more than £27bn to help councils, businesses and communities through COVID-19. This support includes:

• £3.2bn of new funding to councils
• £600m to adult social care to support providers through a new infection control fund
• Over £20bn in support for businesses
• £500m in council tax hardship funds to offer economic support to the most vulnerable
• £300m to support track & trace.