Government announces new funding package for councils, but it’s a ‘drop in the ocean’
Date published: 03 July 2020
Rochdale Council has a £25m black hole in its finances due to the impact of Covid-19
A further £500m of funding has been released by the government to help councils recover from Covid-19 - but it’s been described as ‘a drop in the ocean’.
Rochdale Council is facing a £28m shortfall as a result of coronavirus, Bury £21m; Stockport £35m; Bolton £33m; Trafford £25m; Wigan £25m and Manchester Council is down around £138m.
The new funding just doesn’t go far enough, local leaders say.
Estimate figures for Oldham, Salford and Tameside have not yet been released, but collectively Greater Manchester councils will have to tackle an estimated net deficit of £368m thanks to Covid-19.
Rochdale expects £2.5m from the recent handout, but is awaiting further details on what ongoing support will be available to them from government.
Leader of Rochdale Council, Councillor Allen Brett said: “Clearly the costs of the pandemic are going to impact us for way beyond this financial year. We have taken a huge financial hit and are still left with a significant gap in our finances.
“This latest announcement only partially covers a small fraction of our shortfall and the government need to provide us with the resources we need to continue this fight.”
Despite £13.6m in emergency funding, Rochdale Council still has a £28m black hole in its finances due to the impact of the coronavirus pandemic.
While it has had to ramp up spending over the last three months - accounting for £13.3m of the budget gap - it is the potential long-term loss of income that chiefs are really worried about.
The authority’s business rates and council tax collection fund is expecting a £9.5m hit this year, with bad debt and the number of residents needing council tax support.
Chief finance officer Julie Murphy told a cabinet meeting the fund could take around three years to come ‘back on track’, while a cuts programme would be ‘very likely’ without one-off and ongoing support from the government.
Councillor John Blundell said he found the council’s perilous financial position ‘frightening’.
He added “It just strikes me that what’s being lost in the papers is that element around loss of income and how significant it is.
“I think the government is getting away with funding things like PPE that the council have to pay for. But when it comes to supporting all the staff that have been looking after people in adult social care, children’s services and the like - those services and jobs are going to be in jeopardy because the government won’t recognise this is going to be yet another set of cuts.”
Councillor Blundell continued: “I worry that the government is going to let the people that have been looking after the elderly and children could potentially lose their jobs or we will be in a position where we can’t fund those services properly, because we have not made enough noise about it now.”
The new ‘comprehensive’ government cash boost has been designed to reimburse councils solely for their lost sales, fees and charges, not their commercial losses.
It could spell disaster for local authorities such as Manchester, which has lost £76m of commercial income and £18m from sales, fees and charges.
Manchester Council has already warned it might have to declare bankruptcy by the autumn.
While it is understood the funding is being welcomed as a small step in the right direction, it is a relatively small proportion of the authority’s shortfall and still leaves a big hole.
Bury Council is expecting to get roughly the same amount as Rochdale, £2.5m. The leader of Bury Council, Councillor Eamonn O’Brien described the figure as ‘a drop in the ocean’.
He warned there could be years of cuts on the horizon ‘unless the government provides proper financial support’.
The government has vowed to cover 75p in every pound lost from this portion of a council’s income, but only when those losses are above five per cent of what a council expected to bring in.
The new funding takes the total government coronavirus handout for local authorities in the UK to £4.3bn.
As part of the plans, cash received will not be ringfenced, meaning councils can decide where the funds go.
Westminster has also announced changes allowing local authorities to spread the repayment of their business rates tax deficits to the government over a three-year period, rather than the usual one.
Robert Jenrick MP, Local Government Secretary, said: “Councils are playing a huge part in supporting their communities during this pandemic. From supporting the most vulnerable and keeping vital services running to operating local track and trace, council workers have been at the forefront of this great national effort and are the unsung heroes of this pandemic.
“Today [2 July] I am providing a further package of support 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.
“This government will continue to stand shoulder to shoulder with councils and communities as we recover from this pandemic as we renew our commitment to unite and level up the country.”
The government is set to decide what further support councils will need to meet funding pressures from lost council tax and business rates at its next spending review.
It is understood the financial impact of coronavirus is likely to be felt more keenly next year for councils for various reasons, and there are calls for that to be reflected in the spending review.
Alice Richardson, Local Democracy Reporter. Additional reporting: Nick Statham, Local Democracy Reporter.
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