“Patience is wearing very thin”: Councils slam inadequate funding package

Local council leaders have criticised a newly announced funding package for local authorities during the coronavirus pandemic, warning that patience with the government is “wearing very thin”.

Responding to details published by the government today, the leader of the Local Government Association Labour group and Newcastle City Council Nick Forbes said: “This £500m goes nowhere near filling the £10bn funding gap councils face.”

Southwark Council leader and chair of the pan-London, cross-party organisation London Councils also criticised the package – describing the sum of money as “wholly inadequate”.

Peter John called for the Chancellor Rishi Sunak to bring forward “further, more substantial measures to support the recovery of local economies and local services” in his statement next week.

Commenting on the funding, John said: “£500m for all councils in England is wholly inadequate – another short-term stopgap solution rather than the comprehensive package that was promised.

“It does not reflect the tough financial realities facing London local government, where the funding gap is already £360m since March and is expected to rise to £1.4bn over the whole year.

“It is disappointing that the government will only be partially funding lost fees and charges income – which will leave London boroughs will a shortfall of well over £200m.”

Alongside the £500m funding, the department has said it will reimburse some lost income for councils. Where losses are more than 5% of planned income from sales, fees and charges, it will provide up to 75p in every pound lost.

He added: “This scheme should apply to all types of income not just fees and charges, and must be made available as a matter of urgency. We cannot wait until the year is over and the accounts are audited.

“Certainty over future funding is key to councils’ planning their budgets. Putting off dealing with business rates and council tax deficits until the spending review is a disappointing move from government.”

The announcement from the government today also stated that it would be bringing forward changes to enable councils to spread their tax deficits over three years rather than the usual one year.

Commenting on this, John said: “Encouraging councils to recover these deficits over a longer time period may allow the government to kick the can down the road, but councils have to take a more responsible attitude to the local public finances.

“To keep vital local services running, it is clear that we need to continue our work with government to ensure they fully recognise the scale of the financial challenges London boroughs and councils across the country are grappling with.”

The Ministry for Housing, Communities and Local Government announced the news this morning as a “major new support package” of unringfenced money to support councils.

Labour’s Steve Reed welcomed the funding but urged the government to “stick to its promise to support councils to do what’s necessary to get communities through this”.

Commenting on support package, the Shadow Communities and Local Government Secretary said: “Many councils are on the brink of bankruptcy because of the costs of tackling Covid-19, so any help is welcome.

“But if the government breaks its promise to fund the costs in full, councils will be forced to cut back services like social care, youth activities and bin collections, and closed libraries and leisure centres might never reopen.

“This funding is a start, but we don’t know how it will be shared out and much of the detail is being held back until the autumn which might be too late to save many frontline workers’ jobs that are now at risk.”

“We urge the government to stick to its promise to support councils to do what’s necessary to get communities through this. Councils have kept their part of the bargain, now the government must do the same rather than punish local communities with cuts to the services they rely on.”

Research by the Local Government Association last month revealed that councils face a funding gap of over £7bn – the financial burden of the pandemic amounting to £10.9bn, while the government has provided £3.2bn in additional funding.

Councils across the UK have come under significant pressure throughout the crisis. Of 173 councils who responded to a recent survey, 148 predicted a budget shortfall and at least five have warned they may issue a section 114 notice.

If a council fails to balance the budget, a section 114 notice is issued under the Local Government Act 1998, which prevents any new expenditure and gives a council 21 days to make an alternative budget that fits the criteria.

A budget made after the issue of a section 114 notice would involve significant cuts to existing services. Several local authorities have said that they are weeks away from issuing a section 114 notice.

Labour leader Keir Starmer has said that the pandemic and government inaction have created the “perfect storm” for local authorities, and warned of a “black hole” in council finances if central government fails to act.