Councils are expecting large shortfalls as a result of coronavirus over the next 18 months. Data shows that urban areas are feeling the strain more.
In mid-March, just before lockdown was announced in the UK, the communities secretary Robert Jenrick announced that the Government was ready to ‘do whatever is necessary’ to support councils in their response to coronavirus.
So far, this has been £3.7bn, £500m of which was announced last week alongside a commitment from central government to cover 75p for every pound of lost income from sales, fees and charges. This will still leave a substantial shortfall.
Councils have been on the frontline in responding to the coronavirus pandemic. The LGA expects the cost of increased pressure on adult social care alone to amount to over £3.3bn by the end of September for local authorities. This figure accounts for councils providing additional social care facilities including PPE and enhanced cleaning measures.
On top of this, councils have had their revenue streams squeezed. Local authorities have faced losses of income from the closure of council services such as leisure centres and car parks as a result of lockdown measures. This is alongside business rates holidays and losses of income from council tax revenue which will have affected some places more than others.
A BBC survey of councils has found that in a number of cities, these increased costs and losses of income have quickly added up, in some places more than others. Urban councils that responded to the survey expected to be hit harder on average than councils in non-urban areas. In urban areas, the average worst-case expected shortfall was £109 per person whereas in non-urban areas this was £40 less at £69 per person.
This pattern of shortfalls echoes the pattern of spending cuts since 2010, highlighted by Cities Outlook 2019. Before the crisis, cities suffered from cuts in spending twice as deep as non-cities. And cities in the North and Midlands suffered cuts twice as deep as those in the South (outside London).
Most upper tier local authorities don’t have reserves that will cover the additional expenses resulting from coronavirus. Greater Manchester is an example of this, having been forced to spend reserves ’like it’s going out of fashion’. As a result, a number of councils have described how they would likely meet the conditions to declare section 114 notices in the near future, in effect declaring bankruptcy. Councils in Leeds, Liverpool and Manchester with populations totalling over two million may all soon go bust without additional support. In its response to the BBC survey, Birmingham City Council, which is the largest local authority in Europe described how given the size of their expected shortfall over the next 18 months, a section 114 would be insufficient to rectify the situation.
Shortfalls by cities:
Of the 107 councils in urban areas that responded to the survey, 79 predicted that they would face a budget shortfall because of coronavirus. The expected shortfall per person after accounting for their share of the first two tranches of £3.2bn in funding is shown in Figure 1.
Source: BBC, 2020
*Data is shown only for those cities and large towns where all constituent local authorities both predicted a shortfall and provided figures for this.
Some councils were much more pessimistic than the urban average worst-case shortfall of £109. Aberdeen City Council predicted the largest worst-case shortfall at £359 per person with councils in Milton Keynes, Warrington and Luton also all predicting high shortfalls over £165 per person. At the same time, councils in some places expected shortfalls that, although still worrying, were much lower such as Slough, Chatham and Coventry all of which placed their worst-case shortfall per resident at less than £36.
Table 1: PUAs with highest and lowest expected shortfalls
|Rank||PUA||Worst-case shortfall per resident (£)||Worst-case shortfall (£m)||Rank||PUA||Worst-case shortfall per resident (£)||Worst-case shortfall (£m)|
Source: BBC, 2020
Central government must do two things:
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