Coronavirus pushing councils to 'financial failure' without 'cast-iron' Government funding pledge

Coronavirus-led demand pressures and a loss of income risk combining to push councils towards financial failure, the LGA warns today.

Councils across the country are leading local efforts to support communities through the coronavirus crisis and keep day-to-day services running. This has led to significant unforeseen demands and costs caused by the pandemic – to protect the vulnerable such as older, disabled and homeless people - and in order to continue to keep normal services running, such as bin collections.

This is at the same time as councils have seen a large and immediate hit to their income. Many councils use income from fees and charges to fund a range of services, such as leisure and planning services, many of these services are scaled back or closed so income has dried up yet most costs including payment of staff continue to be incurred.

The LGA, which represents councils in England, is calling on the Government to provide a cast-iron public commitment that it will provide additional funding to fully meet extra costs to councils and compensate for lost income.

Before the coronavirus crisis hit, councils had to identify another round of savings needed to balance their books from April. As they rightly focus on providing vital services, the LGA said it is increasingly unlikely that councils will be able meet these savings this year. Without this urgent government funding guarantee, some councils may be subject to Section 114 reports in the next few weeks.

This would lead to spending blocks by councils and in-year cuts to the vital local services that are supporting communities through this crisis and the national effort to beat this deadly disease.

The £1.6 billion recently provided by the Government has helped ease some of the pressure on local services during the coronavirus crisis. The Government’s decision to also allow councils to postpone business rates payments to central government and its move to pay care grants up front will help councils with some of their immediate cash-flow pressures.

The LGA said it is increasingly clear that further funding is needed to meet all pressures, income losses and expectations placed on councils by various government departments in connection to COVID-19.

Cllr Richard Watts, Chair of the LGA’s Resources Board, said:

“Local government continues to step up to the unprecedented challenge we face as a nation. It will do everything it can to help residents and businesses but is being stretched to the maximum.

“Many councils are facing increased cost and demand pressures at the same time as seeing a significant drop in income. This is unsustainable and pushing councils towards financial failure.

“It is good that the Government has moved to provide some financial help to councils. Additional funding is urgently needed to help councils get through this crisis, support the vulnerable and adapt to life once we defeat this virus when our local services will be needed more than ever to help communities rebuild.

“It would be wrong and unacceptable if councils are then forced to make further cutbacks to the very services that will have helped the nation through this crisis and the key workers who are producing heroics on the frontline see their jobs placed at risk.”