Councils likely to be forced to cut services

The Institute for Fiscal Studies has warned that councils in England face a £2 billion ‘perfect storm’ over the next few months and will be forced to cut services if the government does not meet the cost of soaring coronavirus spending.

Although the government has so far provided £5.2 billion in additional funds, councils expect to spend £4.4 billion more than expected on the pandemic this year, as well as £2.8 billion in losses from fees and charges, leaving them with a £2 billion shortfall.

The IFS says that, without extra funds, councils face a difficult choice between ‘depleting their reserves to low and potentially risky levels or cutting spending on important local services’. Its analysis also claims that the crisis facing local government is likely to continue into 2021-22 when collapsing council tax and business rates collection since lockdown start to feed into council budgets.

The IFS says that, alongside more money, the government should consider relaxing rules that prevent councils from borrowing money to fund day-to-day services, which would ‘help spread the pressure over several years’.

Although English councils collectively have around £3.3 billion of available reserves, the amounts vary widely between authorities. The IFS estimates that around 40 per cent of councils would still be unable to balance their books even if they spent all their reserves.

James Jamieson, chairman of the Local Government Association, said: “Councils need to be able to lead their communities out of this crisis and support recovery, but they cannot do this successfully and also address pressures in social care if they are having to focus on addressing budget cuts.”