Local councils face ‘£3 billion budget deficit’ as nation emerges from lockdown restrictions

By The Press Association9th July 2021News EnglandAdult Care, Business / Funding / Finance, Coronavirus / Covid-19, Government / Politics, Local Authorities, News England, Social Care, Top Stories

Local councils across the UK are facing a £3 billion budget deficit as a result of the pandemic, according to an investigation by the BBC.

The broadcaster’s Shared Data Unit analysed 170 upper-tier and single tier councils to determine how their finances are placed as the nation prepares to emerge from lockdown restrictions.

It reportedly found UK local authorities plan to make at least £1.7 billion worth of savings in the 2021-22 financial year, while relying on more than £500 million worth of reserves to help balance the books.

Despite the planned cuts, which are expected to particularly impact the adult social care sector, the BBC said local authorities predict a collective £3 billion budget shortfall by 2023-24.

A spokesman for the Ministry of Housing, Communities and Local Government (MHCLG) told the broadcaster councils have received £12 billion in support during the pandemic, adding: “In the coming months, we will take stock of the demands faced by councils and the resources available to meet them and will decide on the timetable for future funding reform.”

According to the MHCLG, 10 local authorities in England have applied for either additional financial support from the Government or the ability to treat revenue costs as capital costs, citing “unique circumstances or residual issues that have resulted in unmanageable pressures”.

Croydon Council tops the list with £120 million in requested support, split over the 2020-21 and 2021-22 financial years.

Luton is next with £49 million, while Nottingham has asked for £35 million in extra support.

Last month, the Government’s Public Accounts Committee (PAC) published its Covid-19: Local Government Finance report, which found ratepayers are having to pay an average of 4.3% extra during 2021-22 in council tax bills due to holes in local council budgets.

The report called for the MHCLG to do more to understand the “service implications of current financial pressures”.

It also recommended the department and the Treasury ensure the next Spending Review “includes full consideration of the longer-term effects of the pandemic on local government finance and the demands placed on local authorities”.

The committee’s chairwoman Meg Hillier MP said: “MHCLG did step up to stave off a wave of council bankruptcies as a result of the pandemic, but the long-term health of the sector is still precarious.

“The over-optimism about the resilience of the sector is very concerning.

“MHCLG needs to be a better champion for local government within Whitehall.”

In response, a spokesperson for the MHCLG said: “The committee rightly recognise that we acted quickly and effectively to support councils during the pandemic – in total we have committed over £45 billion to help councils support their communities and local businesses.

“However, we reject their other claims and continue to work closely with councils to ensure they have the resources they need to deliver vital services for their communities – including access to an extra £2.3 billion this year.”