Local services need coronavirus funding certainty

The Local Government Association has warned that councils need further clarity about when they will receive more government funding to help communities through this crisis and beyond.

The government has provided £3.2 billion of vital non-ringfenced emergency coronavirus funding for councils to spend on local pressures and priorities, which councils leaders say has helped meet cost pressures and lost income in the past three months.

But, as councils must balance their budgets each year and act to avoid the possibility that expenditure might exceed available income in any year, the LGA is stressing that without certainty of further funding and flexibility around budget setting many councils will likely have to take measures in anticipation of future funding shortfalls. This could mean in-year cuts to vital local services that are supporting communities through this crisis and the national effort to beat this deadly disease.

The LGA wants to work with government to ensure a package of measures are put in place to address funding pressures and provide the certainty councils need to keep responding fully to the coronavirus emergency and help prepare for the recovery. This is also vital as they look to meet their legal obligation to balance their budgets each year.  

As local authorities continue to work to protect the most vulnerable, support local businesses and bring together communities, they are facing increased cost and demand pressures as a result, while at the same time as seeing a significant drop in income. However, this is unsustainable and council leaders now need an assurance that all additional costs and losses incurred as a direct result of the pandemic will be funded by government.

Extra coronavirus costs and losses of income incurred by councils in March, April and May amounted to £3.2 billion. Councils could need as much as £6 billion more to cover the costs of coping with the coronavirus pandemic during this financial year. This figure will need to be kept under review.

Based on LGA analysis of the latest returns, almost two thirds of further funding needed would be to cover lost tax income (council tax and business rates) and non-tax income (mostly sales, fees and charges). The rest would be needed to cover extra cost pressures as a result of the pandemic.

The loss of business rates (£470 million) and council tax income (£506 million) combined in the past three months accounts for more than half of all income losses for councils over the same period. This highlights the impact of the virus on local economies as some businesses close or people who are struggling to pay bills as a result of loss of earnings.

The financial impact of the crisis will continue to be felt into next year and beyond and any future package of funding measures from government will need to take this into account. The LGA is therefore commissioning independent analysis to project the potential impact of the COVID-19 crisis and the subsequent economic shifts on council budgets and this year and future years and to look at solutions that could help tackle this.

James Jamieson, LGA chairman, said: “Local government continues to lead the way during the emergency response to this crisis, but they are being stretched to the maximum. Vital emergency funding from government has helped meet extra cost pressures and lost income in the past three months.

“Concerns remain about the ongoing financial pressures ahead. Councils will need further funding and financial flexibilities in the weeks and months ahead to meet ongoing Covid-19 pressures and to keep services running normally. Certainty around this is desperately-needed so councils can balance their budgets this year and take vital decisions about how to pay for vital local services next year. Councils not only need to be fully funded to help our communities beat this virus now but also to help support the nation as we tackle the unprecedented social and economic task ahead and move into the next phase.”