Government vows to spend billions to rescue cash-strapped councils

Nearly nine out of 10 local authorities face budget deficits as a result of the coronavirus with the estimated shortfall forecasted to be as high as £3.7bn.

Some of the UK’s largest local authorities say they will effectively have to declare themselves bankrupt unless the government provides more support, a BBC investigation has found.

Local Government minister Simon Clarke said £3.2bn and other support would be made available.

Councils face increased costs from supporting vulnerable people, while their income from fees and rates is falling.

Two government grants to councils in England worth a combined £3.2bn have already been announced.

Leaders previously said funding already allocated was “not even close” to covering costs or money that had already been spent.

Wakefield Council has received £20.4m in emergency funding and expects a £20m shortfall.

This amounts to £57 per resident.

There was a report to the council’s cabinet in June and further update reports will be presented throughout the year as part of the normal budget monitoring processes.

It did not confirm if spending or council tax was under review.

The council said it did not forecast filing a section 114 notice – the measure taken when a local authority runs out of money.

Minister for Local Government Simon Clarke MP said: “We’re giving councils an unprecedented package of support, including £3.2 billion non-ringfenced emergency funding, to tackle the pressures they have told us they’re facing.

“This is part of a wider package of support from across government for local communities and businesses – totalling over £27 billion - including grants, business rate relief and for local transport.

“We are working on a comprehensive plan to ensure councils’ financial sustainability over the financial year ahead – we will continue to work closely with them to ensure they are managing their costs and we have a collective understanding of the costs they are facing.”

Alistair Jones, associate politics professor at the Local Governance Research Centre, De Montfort University in Leicester said: “A lot of shortfall is down to the extra covid spending.

Councils expenses are going up, and the amount of money they’ve been given to play with is not fit for purpose.

“Shortfall is not necessarily an issue if they can balance the books over the next few years. But the reality is, the damage the shutdown has done is not a short-term thing. Some of the issues with regard to social services are going to lead to long-term problems, and they’re going to need the resources to deal with it.

“Central government is going to be reluctant to give councils that, and also reluctant to give them the power to raise money - they’re resistant to that because they control the purse-strings.”

The investigation found across the UK at least six councils say it is possible they will have to issue an S114 notice if further government support is not forthcoming, effectively declaring themselves bankrupt

Local authorities in this situation include some of the UK’s largest unitary authorities - Liverpool, Leeds, Wiltshire, Trafford, Tameside and Barnet.