UK councils face £3 billion financial black hole due to Covid

COUNCILS in the UK are facing a budget deficit of £3 billion as they emerge from heavy spending made during the Covid-19 pandemic, according to an investigation by the BBC.

Around 10 councils have asked to borrow £300 million of emergency money from the government to fix financial holes, while some local authorities faced the risk of bankruptcy.

The government gave £12bn to councils during the pandemic.

A spokesman for the ministry of housing, communities and local government (MHCLG) said, "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."

The BBC analysed a total of 170 upper tier and single tier councils to determine how their finances are placed.

It found that local authorities plan to make at least £1.7bn worth of savings in the 2021-22 financial year while using more than £500m worth of reserves to balance the books.

Almost a quarter of the savings will be made in adult social care departments. Despite making these cuts, local authorities predict a £3bn shortfall in their budgets by 2023-24.

Moreover, 60 per cent of councils in England have risen council tax by the new statutory maximum of 4.99 per cent to compensate for losses.

Besides, fees and charges for parking, planning and crematoria are set to rises in places.

In the London borough of Bexley, 264 staff posts will be deleted, while library opening hours and road repairs will be reduced.

Sharon Taylor, a Labour councillor who chairs the Local Government Association's resources board, said the pandemic highlighted an existing funding crisis brought about by a cut in central government grants.

She said "Cuts to local government hurt people and they hurt the everyday services people see when they walk outside their door."

Since the start of the pandemic, councils were asked to provide extra services, such as home food deliveries for those shielding, finding accommodation for street sleepers and, in some cases, helping with the test and trace initiative.

They also had to supply workers with Personal Protective Equipment (PPE).

Meanwhile, their income from town centre parking, council tax and business rates plummeted during the pandemic.

In several cases, councils have also lost revenue from private investments.

Croydon Council, which borrowed £545m to make a series of investments including a shopping centre and a hotel, declared itself bankrupt in November 2020.

Taylor said the government had encouraged councils to invest in commercial property to raise funds.

She said: "(It) seems to have a very ambiguous attitude towards that now, and is saying those investments were down to us and if we've lost income they are not going to make up for those losses."