LGA says that council loan repayments delay needed

The Local Government Association has said that councils need access to cheaper short-term loans with delayed repayments to help them tackle current cash flow problems caused by the coronavirus pandemic.

Many councils have seen increased cost and demand pressures as a result of the pandemic at the same time as a significant drop in income. In the past three months, almost £1 billion in combined business rates and council tax income has gone uncollected as businesses and residents struggle to cope.

The minimum term for a Public Works Loan Board (PWLB) loan available to councils is one year but this is too long to help with the immediate cash flow shortfalls faced by councils as a result of the pandemic.

Council leaders are warning that this will force some councils to turn to short-term loans at expensive rates, diverting vital resources away from the services communities are relying on to get through this pandemic to pay interest rates of what effectively amounts to ‘pay-day’ loans.

The LGA is calling for the PWLB to offer shorter-term loans to councils to ease the pressure they face, suggesting that the government also needs to delay repayments by councils on all new and existing loans to further help councils manage the financial challenges they face.

Richard Watts, chair of the LGA’s Resources Board, said: “Councils are playing a vital role in supporting communities through this crisis - supporting efforts to track and trace the virus, protecting the vulnerable, helping rough sleepers off the street and keeping other services, such as bin collections, running normally. The government has written off debt for NHS bodies as a result of Covid-19. Providing councils with access to short-term loans and delaying repayments is the least it can do to help tackle the significant cash flow problems many face.

“The scale of the economic, environmental and community challenges that we will face should not be under-estimated. It is vital that councils can support the economic recovery as emergency measures are lifted and we come through this crisis. This is vital if we are to ensure that all communities can contribute to and benefit from this recovery.”