Fears over bankrupt councils as virus costs rise
COUNCILS IN Yorkshire face a financial blackhole of more than £350m in the face of rising coronavirus costs, new data has revealed.
In the worst case scenario, Yorkshire’s local authorities will be left with £364.2m in unmet costs, with a best case scenario still seeing a £282.7m shortfall in funds.
The data, obtained by the BBC, comes after research by the Centre for Progressive Policy thinktank which showed eight out of 10 councils were looking at effective bankruptcy despite government support during the coronavirus crisis.
In May, Yorkshire’s town hall leaders told The Yorkshire Post that they could go bankrupt within months.
One of the country’s largest local authorities, Leeds, may have to issue a Section 114 notice, which bans all new spending. In the East Riding, local leaders have called an emergency budget meeting for next month.
Professor Alistair Jones, Associate Politics Professor at the Local Governance Research Centre at De Montfort University in Leicester, said: “We seem to be – or have already – run out of money.”
Councils in Yorkshire have received £287.48m in support from the Government so far, with £3.2bn being handed out nationally. But Leeds has specifically asking for the Government to underwrite the shortfall in business rates and any drops in council tax.
The authority also called for Public Works Loan Board debt held by councils to be written off, or the interest rates reduced. The city’s council had the fourth worst predicted shortfall in the country at £60.6m this year.
Some of the region’s councils will be able to dip into reserves to cover costs, but others cannot.
A spokesman for Calderdale Council said: “If the Government does not fully compensate the Council we will need to identify savings in-year, as we do not have sufficient reserves to meet these costs.”
Local Government Minister Simon Clarke said: “We’re giving councils an unprecedented package of support, including £3.2bn non-ringfenced emergency funding, to tackle the pressures they have told us they’re facing. This is part of a wider package of support from across government for local communities and businesses – totalling over £27bn – including grants, business rate relief and for local transport.”
Yesterday, a Centre for Progressive Policy report warned the Government’s levelling up agenda will not be able to continue until councils are fully compensated for losses due to coronavirus.
The CPP found that, despite emergency non-ringfenced Covid-19 funding, 131 upper tier councils out of 151 in England did not have sufficient funds to make up for projected increased costs and reduced income due to Covid-19, including 18 out of 19 of upper tier authorities which significantly feature former so-called Red Wall constituencies.