Revealed – Coronavirus hit on council finances and what it means for taxpayers
PUBLISHED: 05:30 23 April 2020 | UPDATED: 12:17 23 April 2020
Councils across Suffolk have issued a plea to the Government for more cash to tackle the coronavirus crisis, as the public purse has taken a multi-million pound hit in Suffolk in just one month.
One council predicted that additional expenses and income losses would be three times higher than the initial government injection of support, while another said its meagre financial package covered just a day and a half of the losses it faced this month.
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The coronavirus crisis has battered authorities as they face the double whammy of extra costs for relief efforts coupled with a big dip in income.
Discounts have already been issued to homes financially struggling to pay council tax and council house rents, but council tax increasingly makes up a smaller and smaller part of how public services are financed.
Councils now use investments in commercial property, as well as income from leisure centres, theatres and car parks to bring money in, and help limit the amount in council tax rises needed to pay for vital services.
Lockdown has effectively slashed that income entirely.
Those vital services funded include waste collection and recycling, foster care services, highway maintenance, grass and hedge cutting, street lighting, adult care provision, fire services, Trading Standards, planning permissions and environmental health to name a few.
Councils across England were invited to submit a Delta return to the Ministry of Housing, Communities and Local Government (MHCLG) last week – a form which summarises the financial hit they have taken.
Outlined below is the investigation carried out by the Local Democracy Reporting Service in Suffolk.
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Ipswich Borough Council
Councils were asked to outline how much extra spend they have generated in April 2020 (up to Wednesday last week), how much income has been lost, and, if possible, to specify how much of that lost income was from council tax and business rates from the discount schemes.
While those numbers only represent a snapshot in time, the picture is already concerning.
At Ipswich Borough Council, an extra £502,000 was spent, which combined with a £1.226million income loss has hit the council coffers hard.
Worryingly, it received just £82,000 from the Government’s initial injection of cash to councils, totalling £1.6billion at the end of March.
Labour borough council leader David Ellesmere said: “That’s covered our losses for a day and a half.”
The MHCLG five days ago announced a fresh £1.6bn settlement is on the way, but authorities don’t yet know how much of that they will get. If it is anything like the same amount as before, Ipswich could be in dire straits.
Indeed, Suffolk County Council is understood to have received about 98% of the pot for the entire county, meaning the five district and boroughs shared the remaining 2% between them.
“Clearly districts are facing major financial issues as a result of this,” Mr Ellesmere said.
“We are saying to Government that we need more money from this second settlement of funding, and we hope they are listening to that.
“If we are not recompensed by the Government we will be undoubtedly looking at cuts in services.”
Mr Ellesmere said that the most important services such as black bin waste would continue come-what-may, and hoped that the Government keeps its word on recompensing councils, but with seven figure losses in April alone and the extent of available reserves sitting at around £8m, it is clear that such a stringent lockdown cannot be financed for anymore than a few months.
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East Suffolk Council
England’s largest district council received just over £121,000 in the initial coronavirus response settlement, which has helped cover the £95,000 additional costs for April, but like Ipswich doesn’t go anywhere near far enough to bridge the gap from the £1.216m lost in income for the month.
While the additional costs are much lower than Ipswich, the council said that doesn’t include expected hits in housing, corporate and environmental services that cannot yet be calculated because it is too soon.
However, the finances here don’t look as immediately threatened to such an extent as Ipswich.
It’s report added: “The council’s financial planning is such that in the short term we have sufficient investments maturing which could cover any abnormal increases in cashflow.”
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Suffolk County Council
Suffolk County Council has forecast an additional expenditure of £56m for and an income loss of £7m for the whole of the 2020/21 financial year.
For April alone, its overspend was £5.2m coupled with a £1.38m loss of income.
It’s Government support fund last month was £20.7m, but doesn’t even cover half of the extra costs incurred for one month.
Reserves are north of £50m at the moment, which is a stronger position than many councils are in nationally, but without any Government support or income at all it wouldn’t take much more for those to start dwindling rapidly.
Conservative cabinet member for finance, Gordon Jones, said: “It will take some time before we are able to fully understand the true financial impact of Covid-19 on council services.
“We currently estimate that the additional costs and income lost during the lockdown period may already be three times more than the £20.7m funding that the Government provided us in late March.
“The largest area of spend for us is adult care and the costs have escalated greatly in this sector since the coronavirus took hold in March.
“We are using the money we have received from Government to meet some of these additional costs already, but as time moves on there are further, continuing additional costs for providing care support to adults and children due to the social distancing and resourcing restrictions we all need to work with. In addition, we will continue to source PPE from all available avenues to reduce infection and protect staff and residents.”
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West Suffolk Council
An estimated extra spend of around £700,000 comes amid a backdrop of just £80,000 in support for the authority in the west of the county.
A council spokesman stressed this was only an estimate, as it was too early determine the full financial picture.
He said: “It is too early to give exact numbers as we are not even a full month into the new financial year and our focus is fully on tackling Covid-19 by helping our communities, businesses and delivering services.
“We welcome the recent announcement of funding and support for councils but the finances provided must meet the costs local authorities are shouldering in their important role in tackling Covid-19.
“There is no doubt that this will cost councils and depending on the length of time this could be millions of pounds. This is something we will be taking up with our local MPs and Government to try and avoid taxpayers being left out of pocket and expect national bodies to be championing this as well.”
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Babergh District Council
Babergh opted to give a full-year estimate in its Delta return last week, which predicted a £257,000 additional spend and a £955,000 loss in income.
The authority said it was early days, and that it “simply doesn’t have enough data yet to predict these ongoing costs and losses with certainty”.
Conservative council leader John Ward said: “The picture is changing on a daily basis as we have new situations to respond to and new information from the Government to factor in.
“We do know, however, that we are and will continue to incur significant additional costs as part of our response to supporting our communities; and also significant loss of income.
“For example we expect a reduction in both our council tax and business rates income as the financial position of both our residents and businesses is affected by Covid-19.
“As we have only just issued bills for 2020/21, it’s too early to know what the full impact will be. Similarly, we know there are some areas where we will incur additional costs, for example around emergency accommodation costs for those at risk of homelessness.”
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Mid Suffolk District Council
Like Babergh, Mid Suffolk has given a full year forecast which estimates a £229,000 in additional costs and an income loss of £939,000.
Conservative cabinet member for finance, John Whitehead, said those same caveats applied, and added: “We share the frustrations of individuals and businesses everywhere in not yet knowing exactly how Covid-19 will affect our finances.
“We are meeting virtually on a regular basis as we attempt to tease out the various streams of financial information but, although we know the key areas that need close monitoring over coming months, any emerging numbers will be tentative only for at least a few more weeks.”
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It is worth bearing in mind that these figures, while useful, are at the moment only a snapshot of this moment in time. In theory, if the coronavirus peak is happening now, which is what the Government’s scientists are suggesting, the coming months shouldn’t be anywhere near as bleak in terms of finances as April has been, and much depends on what central government decides to do to boost the councils’ warchests.
It is exactly these sorts of scenarios that councils keep reserves for but reserves can only be used once and it is clear from every authority here that the financial package to date hasn’t come close enough to addressing the problem. That should change with the new settlement, and councils across Suffolk are unanimous in calling for the MHCLG to take into account the cost pressures.
But the reality is that even once lockdown ends and the financial picture starts to become clearer, there is a good chance savings will need to be made. Work on next year’s budgets will begin in a few months time, and is likely to be an indicator of the extent the coronavirus crisis has bruised the taxpayer purse.
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