£1.2bn Covid funding gap leaves councils facing service cuts, finance heads warn

Government announces additional £500m to meet Covid costs and scheme to cover most of councils' losses from charges, but gap remains, say town hall leaders

Budget cut
Photo: ducdao/Fotolia

Councils face making significant funding cuts due to a £1.2bn hole in their finances resulting from inadequate government funding to meet the impact of Covid-19.

That was the message from council finance heads after the government announced its latest funding package for town halls to deal with the impact of the pandemic, which has hit authorities’ finances in three ways:

  • additional costs, notably in adult social care;
  • lost income from fees and charges for services, such as day centres, leisure centres, that have had to close, and commercial losses, for example from council-owned airports;
  • reduced council tax and business rate income as a result of the depressed economy.

Today, local government secretary Robert Jenrick announced an extra £500m to meet councils’ additional costs, bringing the total to £4.3bn, £600m which is ringfenced for social care to tackle infection control, principally in care homes.

He also announced a scheme to cover the majority of councils’ losses from fees and charges – though not commercial income – and said the forthcoming spending review would include plans to compensate authorities for some of their council tax and business rate deficits in 2020-21.

However, the Chartered Institute of Public Finance and Accountancy (CIPFA) said the package left a £1.2bn hole in council finances.

“Now that the government has today finalised its package, this autumn’s budget round where councils plan for 2021-22 and beyond will be the toughest they have ever experienced,” said CIPFA’s chief executive, Rob Whiteman.

“Residents up and down the country are likely to experience service redirections as councils meet their statutory duty to balance budgets.”

The Local Government Association offered a similar message, with its chair, James Jamieson, saying: “This package offers some positive measures and recognises the pressures councils are facing, but more is desperately needed to fully address the severe financial challenges facing councils and our local services as a result.”

He called on ministers to cover the full bill for councils’ extra costs and lost income from the pandemic, including from commercial activity, “if councils are to avoid having to make tough decisions on in-year cuts to services to meet their legal duty to set a balanced budget this year”.

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