Deep cuts expected as city council is on a financial cliff edge
COVID COULD COST CITY £71M
THE first 12 months of the coronavirus pandemic is expected to cost Hull City Council just over £71m.
A report due to be discussed by councillors later this week shows the dramatic impact of the virus on the authority’s finances.
It also warns that “significant service reductions” will be needed to help balance the council’s books unless the government provides substantial extra funding.
Without more money from Whitehall, the report says the council will not have enough cash held in reserves to meet continuing extra costs of dealing with Covid-19.
Nor will it be able to close a £5m budget deficit it was expecting to manage from next year under a now-postponed new annual funding deal from the Government.
Some of the UK’S largest UK councils have already said they may have to declare themselves effectively bankrupt without further government support.
In a new report, the council’s finance director David Bell stops short of mentioning bankruptcy. He does acknowledge council finances are heading towards a dangerous cliff edge.
He said: “The Covid-19 crisis that has impacted the country from March of this year has fundamentally changed the financial outlook for the council
“Although the Government has provided additional grant to help offset the financial impact, this is currently both insufficient to meet the expected costs and loss of income in 2020-21 and does not provide the council with the means to build next year’s budget while maintaining existing services.
“The financial impact of the crisis creates two financial problems: an unprecedented one-off impact and, secondly, a reduction in income, and additional cost, in future years which widens the structural deficit going forward.
“As a result, the council’s short and medium-term financial stability is now in doubt, with projected deficits of £11m in 2020-21 and £26m in 2021-22.”
Although the council’s reserves are forecast to stand at £38m by the end of the financial year next March, Mr Bell said the figure would not be enough to protect the council from having to make deep cuts to services without an intervention from the Government.
“The forecast deficits of £58.7m arising over the next four years are considerably in excess of the total reserves avaialble,” he added.
“Many councils are facing the same financial dilemma after many years of reduced funding, which has seen services reduced to minimum sustainable levels and with financial resilience eroded.
“This now results in many councils facing a potentially disastrous scenario whereby maintaining both financial stability and critical services becomes impossible without government intervention.”
Mr Bell said his team were “hopeful” the council’s long-term viability would be maintained through government support.
But he added: “It is important to highlight that the council is operating in a time of unprecedented uncertainty and that it is possible that plans may need to be revisited and further cost savings sought, possibly with urgency, in the light of developments.”
The council’s £71m bill includes nearly £16m being spent on infection control to support vulnerable people living in residential care and supported housing including hostels.
It also includes nearly £8m on additional measures related to child safeguarding and £2.2m on managing outbreaks of the virus.
The overall cost also includes an expected £4.1m loss in income from parking and trade waste charges during the lockdown together with £2m in lost council tax payments, £2m from the closure of the City Hall and the New Theatre and £3.3m in lost admission income at leisure centres.
So far, the Government has given the council an extra £42.8m to help cover the costs.