Councils facing huge budget deficit

Essex County Council faces a huge budget deficit as a result of coronavirus unless the government provides more support.

An investigation by the BBC Shared Data Unit has revealed that the estimated shortfall is forecasted to be as high as £171million – one of the biggest in the country.

The council has seen increased costs from supporting vulnerable people, while its income from fees and rates is falling.

The government has already given £63.6million in funding to the council in two tranches to help cover its costs.

However, this is far short of what is required.

While the council is not expecting to issue an S114 notice – effectively declaring itself bankrupt – it is using its reserves and considering reviewing revenue or capital programmes to tackle the shortfall.

Councillor David Finch, leader of Essex County Council, said: “We have drawn down funding and used our reserves to divert money to the services that need financial support most, and where it can have the biggest impact.

“In the current climate it is extremely challenging for any local authority to model the medium to long term financial impacts of the pandemic.

“The biggest unknown ahead is the impact on council tax and business rates which we rely on for more than 80 per cent of our funding.

“Inevitably the impact on unemployment and the economy will have reverberations on tax nationally and locally.

“We look forward to working closely with government to find positive solutions to this problem whilst we recover Essex’s economy.”

Southend Council says it could also face a shortfall as high as £9.5million, while Thurrock has forecast a deficit of £500,000.

When compared to the population, Essex County Council’s shortfall works out as £115 per head, compared to £52 per person in Southend and £3 per person in Thurrock.

England’s 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.”

Lower tier authorities are also feeling the impact of the virus.

Chelmsford City Council estimates an £8.6million shortfall this year as a result of the coronavirus pandemic.

Total predicted losses and extra costs in fact come to £11million.

With a Government grant of £1.8 million plus £600,000 of Government contributions to the pay of furloughed staff, the estimated shortfall is still £8.6 million for the year.

The city council provides essential services to Chelmsford residents, such as collecting waste and recycling, housing, helping people who are homeless, looking after green spaces, managing new development, keeping the community safe, cemeteries and crematoria, business support, taking care of the environment and much more.

These services cost over £60 million a year. Half of that is paid for by fees, charges and sales levied by the council, and all those have dropped dramatically in the last three months.

Car park charges, admissions to leisure centres, theatres and events, and hire of spaces like Hylands Park all help pay for these services. During the pandemic, these income-generating venues are closed, which means that there is a significant budget shortfall.

Costs are increasing too. An extra £360,000 is being used to help people who are faced with homelessness. Agency staff have been hired to cover key workers who have not been able to work, at a cost of £90,000, and there have been other costs associated with enabling staff to work from home and getting important information out to vulnerable residents.

Councillor Stephen Robinson, Leader of Chelmsford City Council, said: “Like organisations all over the world, the city council has a funding gap which is growing. The money we raise from fees at events and venue charges pays for services that residents need.

“Without it, we will struggle to fund essential public services. If the money is not there, we cannot pay for the places, equipment, food, staff costs and so on required to keep them running. The final out-turn could be worse than currently estimated.

“Local government is the lifeblood of essential services for the community and many people take it for granted. Chelmsford City Council was previously in a strong position compared to some local authorities, but this pandemic has taken its toll and councils around the UK urgently need government support if we are to continue our work.”

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Piers Meyler

Local Democracy Reporter