Councils face finance black hole over Covid- 19 costs, says report

COUNCILS IN England are facing an ever- increasing financial black hole as increased costs coupled with losses due to coronavirus mean spending on adult and child social care could be a risk.

A report released today from the Institute for Fiscal Studies ( IFS), funded by the Economic and Social Research Council and the Local Government Association, found that the balance sheets for councils looked grim before the most recent surge in coronavirus cases.

But with new rises in the number of infections and six months of measures announced by Prime Minister Boris Johnson this week, the situation continues to worsen.

Labour accused the Government of “allowing councils to sink deeper into debt”.

Shadow Communities Secretary Steve Reed said: “The Government promised to level up communities, but instead they are standing by and leaving them to sink.”

However, the Ministry for Housing, Communities and Local Government ( MHCLG) has consistently said councils have received unprecedented support topping £ 4.3bn.

A spokesman stressed that for losses of sales, fees and charges over and above the first five per cent of planned income, the Government is covering 75p in the £ 1.

The spokesman added that for many councils, this will be a “significant portion of their income lost as result of the pandemic”.

The Government said it will continue to work closely with councils, and urged any authorities concerned about their situation to contact the MHCLG to stave off an escalating financial crisis.

Researchers at the IFS found councils needed an extra £ 3.1bn on top of what had already been given to meet their obligations.

Some £ 2bn would hit budgets this year, but another £ 1.1bn would be spread over the next three years in cases such as reductions in local tax revenues.

And researchers said that as councils made their forecasts before most local lockdowns came into force, and before more stringent national restrictions were announced, the final shortfall could be higher.

It comes after pleas from town and city halls across the country for more help. In June, Yorkshire’s councils estimated a funding gap of £ 350m due to coronavirus.

David Phillips, an associate director at IFS and an author of the report, said: “Our middle scenario implies that councils will need an extra £ 3.2bn in real- terms funding by the mid 2020s to meet rising spending needs.

“But this figure is highly uncertain and could be billions higher or lower, depending on what happens to underlying demands and costs, and the scale and duration of ongoing impacts of the Covid19 crisis.”

They are standing by, leaving communities to sink. Shadow Communities Secretary Steve Reed.