Southend Council is expected to have a deficit of more than £10million by the end of the year unless the Government agrees to provide extra funding.
The estimated £11million deficit is entirely down to the Covid-19 pandemic which has left the council spending millions on extra support for residents while also reducing income through council tax and business rates.
Deputy council leader, Councillor Ron Woodley, said it means the authority has some “difficult choices” to make when they set the budget for 2021.
He said: “We have a meeting next week to talk about finances and next year’s budget but at the moment we are looking at an £11million deficit between revenue and expenditure by year end.
“We are still hoping the Government will make good on their promises in terms of supplying sufficient funds to reduce the deficit as this is entirely down to coronavirus.
“Looking to the budget next year, we will need to make difficult decisions on what impact the £11million will have, such as will it reduce our reserves to a level that makes them impractical.”
The £11million estimate is an increase from £9.5million previously forecast in council reports in June. Overall the pandemic is estimated to have cost between £15million and £20million.
Cllr Woodley added: “Right now the Government keeps talking about changing things in local government but all it is doing is bringing extra costs.
“What we need to do right now is look at how to save and legitimately pay for local services, we still don’t know the full impact this is going to have on adult social services or children’s services.
“Instead of tinkering with local government and changing things, they need to look at how we can support residents now.”
The Institute for Fiscal Studies (IFS) published a report on Wednesday suggesting the pandemic has caused a council funding crisis.
Forecasts published by councils across the country show spending will exceed the additional funding provided by the Government by around £2 billion.
The IFS says the drop will leave some councils facing a choice of either depleting their reserves or cutting spending on important services.
David Phillips, an associate director at IFS and an author of the report, said: “Even if more funding or flexibilities are forthcoming this year, councils will still not be out of the Covid-19 woods.
“Financial pressures will continue into next year and beyond, not least because shortfalls in council tax and business rates collections will have to be reflected in councils’ main accounts.
“The Government must ensure that the resources made available to local Government are consistent with its expectations of the range and quality of services councils should provide as well as the role it sees them playing in the social and economic recovery from the Covid-19 crisis.”