UK councils suffer £3billion budget deficit due to Covid

UK councils suffer £3billion budget deficit due to Covid

UK councils suffer £3billion black hole due to Covid: Residents face tax rises and slashed services as officials battle to avoid bankruptcy – with 10 local authorities asking for emergency government loans

  • UK councils plan to make at least £1.7bn of savings in the 2021-22 financial year
  • Despite planned cuts, the councils predict a £3bn budget shortfall by 2023-24
  • Croydon Council came top of the list with £120million in requested support
  • Luton came second at £49million, while Nottingham has asked for £35million 
  • Have YOU felt the effect of council cuts? Email katie.weston@mailonline.co.uk 

Have YOU felt the effect of council cuts?

Email katie.weston@mailonline.co.uk

Councils across the UK are suffering a £3billion budget deficit due to the Covid-19 pandemic with residents facing tax rises and slashed services as officials fight to avoid bankruptcy, according to an investigation by the BBC.

A total of 170 upper tier and single tier councils were analysed to determine how their finances are placed as the nation prepares to emerge from lockdown restrictions.

The investigation found local authorities plan to make at least £1.7billion worth of savings in the 2021-22 financial year while relying on more than £500million worth of reserves to help balance the books.

Despite the planned cuts, which are expected to particularly impact the adult social care sector, the broadcaster said councils predict a collective £3billion budget shortfall by 2023-24.

A spokesman for the Ministry of Housing, Communities and Local Government (MHCLG) said councils have received £12billion in support during the pandemic.

Croydon Council tops the list with £120million in requested support, split over the 2020-21 and 2021-22 financial years. Pictured: An image from a local complaining about rubbish and recycling services in the area

He added: ‘In the coming months, we will take stock of the demands faced by councils and the resources available to meet them and will decide on the timetable for future funding reform.’

According to the MHCLG, 10 local authorities in England have applied for either additional financial support from the Government or the ability to treat revenue costs as capital costs, citing ‘unique circumstances or residual issues that have resulted in unmanageable pressures’.

Croydon Council tops the list with £120million in requested support, split over the 2020-21 and 2021-22 financial years.

Locals in the town have complained about the effects of council cuts, with references to a lack of ground-keeping, leading to litter strewn across parks and grass growing over headstones, alongside black mould in council-owned properties.

Elizabeth Ash, who has lived in the area for 25 years, said: ‘We don’t have money to waste but it keeps getting wasted. The residents have to live with the fallout from it.’

The council’s leader, Hamida Ali, said she was ‘serious’ about tackling the financial issues and improving how the town is run. 

Luton is the second highest council for requested support at £49million, while Nottingham has asked for £35million in extra aid.

Last month, the Government’s Public Accounts Committee (PAC) published its Covid-19: Local Government Finance report, which found ratepayers are having to pay an average of 4.3 per cent extra during 2021-22 in council tax bills due to holes in local authority budgets.

The investigation found local authorities plan to make at least £1.7billion worth of savings in the 2021-22 financial year while relying on more than £500million worth of reserves to help balance the books (file photo)

The report called for the MHCLG to do more to understand the ‘service implications of current financial pressures’.

It also recommended the department and the Treasury ensure the next Spending Review ‘includes full consideration of the longer-term effects of the pandemic on local government finance and the demands placed on local authorities’.

The committee’s chairwoman, Meg Hillier, said: ‘MHCLG did step up to stave off a wave of council bankruptcies as a result of the pandemic, but the long-term health of the sector is still precarious.

‘The over-optimism about the resilience of the sector is very concerning. MHCLG needs to be a better champion for local government within Whitehall.’

In response, a spokesperson for the MHCLG said: ‘The committee rightly recognise that we acted quickly and effectively to support councils during the pandemic – in total we have committed over £45billion to help councils support their communities and local businesses.

‘However, we reject their other claims and continue to work closely with councils to ensure they have the resources they need to deliver vital services for their communities – including access to an extra £2.3billion this year.’

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