Taking into account the grant support received so far, and assuming that the income guarantee scheme parameters will compensate councils for around £1 billion of lost non-tax income, the Institute for Fiscal Studies estimate there is still an unfunded overall pressure of £1.1 billion in 2020/21 that councils will be forced to absorb unless further funding is announced.
- Councils have shown leadership and have supported their communities during the COVID-19 pandemic. Local authorities and their essential workforce have worked hard to protect the most vulnerable within our communities.
- Prior to the pandemic, councils had already dealt with a £15 billion reduction to core Government funding between 2010 and 2020. The extra costs, loss of income and cash flow pressures arising from COVID-19, have only enhanced this financial pressure.
- It is positive that Government has recognised councils’ efforts in the response period by providing additional funding, including unringfenced funding totalling £4.6 billion; specific funding to support their work on a range issues; £6 billion in cash flow measures; and a new scheme to compensate for income losses from a proportion of sales, fees and charges.
- However, taking into account the grant support received so far, and assuming that the income guarantee scheme parameters will compensate councils for around £1 billion of lost non-tax income, the Institute for Fiscal Studies estimate there is still an unfunded overall pressure of £1.1 billion in 2020/21 that councils will be forced to absorb unless further funding is announced. These estimates were made prior to the introduction of the national lockdown so this gap could grow to be in the region of £2 billion.
- The Government has provided some much-needed support to councils but significant challenges remain. It is vital that the Government addresses in full the financial challenges facing councils as a result of COVID-19, including all lost income and local tax losses, and provides further investment so councils can protect and improve local services next year.
- The announcement of a one-year Spending Review was hugely disappointing, and will mean councils will only get a one-year funding settlement for the third year in a row. This makes it incredibly difficult for them to plan how to provide the local services our communities rely on many of which have proved so vital during the pandemic.
- We are calling on the Government to provide an additional £8.7 billion in core funding in 2021/22, made up of the £4 billion funding gap to sustain 2019/20 service levels (already assuming annual inflationary increases to grants and 2 per cent annual council tax increases), £1.8 billion to deal with other quantifiable pressures to stabilise the sector and £2.9 billion of other core funding requirements to help councils improve their core service offer.
- We are also calling on the Government to resume the Fair Funding Review, with a guarantee that the transitional mechanisms will not only ensure that no councils experience a loss of income. The same call for transition mechanisms applies to any business rates reset, should one go ahead.