An extra £1.6bn is welcome but boosting council resilience will need more

A short piece for Room151 (Longview Productions Ltd) on the further Government support that will be needed by councils if they are to help in the post- COVID recovery of their areas without having to worry about their own financial collapse.

Local government minister Robert Jenrick. Photo: Pippa Fowles, Number 10, Flickr.

Whitehall has offered another huge tranche of funding to councils but it may prove too little as Covid-19 reveals the vulnerability of local government funding structures.Financial resilience is already a big subject in local government with a significant number of councils holding dangerously low—and falling—levels of revenue reserves. The Covid-19 outbreak has effectively pulled many more authorities closer to the brink, and it is little wonder that S114s are making the news again.

So, it was right that the government stepped in at the weekend with the promise of a further £1.6bn of financial support for local government. However, the additional financial pressures are massive and, I suspect, more support will be required to ensure that councils remain able play a key role in their area’s post-pandemic recovery without having to worry about their own survival
Those pressures are not just about the additional costs of looking after vulnerable people and protecting essential services but significantly arise from lost income. It is recent changes in local government funding that have made the sector more vulnerable to this crisis.
Since revenue support grant was all but scrapped, 60% of council funding now comes from council tax—twice as much as ten years previously. Council tax support claims are already rocketing as collection rates come under pressure, and it is not unreasonable to forecast 10%, or more, losses in council tax income.

Business rates incomes will come under similar pressure whilst some fees and charges, such as car park and leisure centre incomes, have been wiped out completely in lockdown. Most other incomes have also significantly reduced.

Taken together, additional costs and lost income will have a devastating impact on already depleted reserves. A quick graphical analysis of the ten district councils with the lowest reserves shows that reductions in council tax and six months loss of car park income, plus other fees and charges, will take most to the cliff edge without significant government support.
Although upper tier authorities tend to have less relative reliance on fees and charges, many have critically low levels of reserves. All are susceptible to council tax losses and demand pressures, particularly in respect of vulnerable groups.

Robert Jenrick was right to refer to local government as “unsung heroes” as all over the country councils have stepped up to respond to the crisis. Councils will be at the forefront of the recovery process helping to rebuild communities and economies from the shattering impact of Covid-19.
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There is a lot the government might do in the medium term. Delaying and reconfiguring the fair funding review, so that it really is fair, would be a good start. Providing significant PWLB discounts for capital projects so that councils can stimulate local economies would also help. First and foremost though, councils need to be recompensed for the costs of Covid-19 so that they can continue to focus on community health and well-being without fearing for their own financial health.