Yesterday the Department for Housing, Communities and Local Government (DHCLG) announced new financial support for local authorities struggling with coronavirus-related overspend and lost revenue. The package, which the Department said would be distributed to “address spending pressures and in recognition of lost income”, promised £500m extra funding as well as reimbursement for 75 per cent of lost income from fees, charges and sales.
Despite the announcement, however, analysis by the Local Government Association (LGA) has shown that councils face a funding gap of £7.4bn – over 14 times the amount offered by DHCLG’s package. Earlier this week, speaking at the LGA’s annual conference (this year held online), Labour Party leader Keir Starmer said councils were facing a “perfect storm” during the coronavirus crisis, and put the size of the financial “black hole” at £10bn.
At the beginning of the pandemic, the embattled Communities Secretary Robert Jenrick – currently facing accusations of impropriety due to his involvement in the approval of a £1bn development planning application to a party donor – told local authority leaders to spend “whatever it takes” in the fight against coronavirus, promising them central government would later reimburse them.
Councils in many areas have since led strong public health campaigns, providing food deliveries to those shielding, coordinating volunteers, purchasing PPE for staff and setting up Covid-19 telephone hotlines for those in need. Simultaneously, while seeing costs rise in social care and new areas of spending, those same authorities have lost huge amounts of council tax and business rate revenue, as well as income from parking charges, closed municipal leisure centres and returns on commercial investments.
In May, councils received the second installment of a total £3.2bn financial boost, but it has not been enough to compensate for unprecedented losses and extra spending. Today, the Local Government Chronicle reports that a third of senior officers in local authorities up and down the country expect to issue so-called s114 notices, which effectively declare a council bankrupt.
Since 2010, many local authorities have lost around two-thirds of their annual central government grant, with the DHCLG the worst-hit government department under austerity. Northern cities have been the hardest hit, with 7 out of the 10 the largest city cuts falling in the North West, North East or Yorkshire. Per capita, Liverpool has lost £816 per resident, a situation compounded by the coronavirus crisis, which has left it on the edge of bankruptcy.
In June it was reported that without a substantial financial offering from the Treasury, Manchester City Council would be forced to set an emergency budget with heavy cuts to services this month. The city is facing an estimated deficit of £133m for 2020-21, partly caused by losses from the municipally owned Manchester Airport. Leeds and other councils across Yorkshire have warned bankruptcy proceedings will start within months without a major cash injection.
The LGA, the national body representing local authorities, is calling for all additional costs incurred as a result of the pandemic to be offset by central government – that’s estimated to be £4.4bn this financial year alone. The LGA is also asking for “a solution” to £3.7bn in lost council tax and business rates.
Despite recent claims from the Prime Minister that the age of austerity is over, severe financial constraints still plague local government. The Westminster rhetoric of “whatever it takes” has quietly morphed into “share the burden”.
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