Covid crisis will force councils to make ‘deep cuts’ to services to plug funding shortfall of up to £2.2bn

Councils across England are facing having to make unprecedented cuts to services in the coming years, after coronavirus left them with multimillion-pound black holes in their funding.

The cost to local authorities of the pandemic has been revealed as £1.1bn to £2.2bn, prompting leaders to describe their financial situations as the worst they have ever seen.

Early intervention and prevention projects for vulnerable families, as well as recycling schemes, are among the cutbacks most likely to be in the firing line as local authorities seek to claw back cash to avoid meltdown.

And council taxpayers will be asked to stump up more, with bills increasing by as much as 5 per cent, just as household incomes have been squeezed by job losses and instability.

Already struggling after years of austerity, local authority finances have been badly hit as income from car parking and leisure facilities have fallen off a cliff, at the same time as councils faced unplanned bills for costs such as PPE, helping support care homes and launching test and trace systems.

The Local Government Association (LGA) said councils would be forced to absorb £1.1bn in 2020-21 – and warned that given the continued impact of the pandemic, the figure could grow to £2.2bn.  

Cheshire East Council, which is down by £13m this year thanks to the pandemic, is among many local authorities consulting residents on where to make cuts.

Next year’s budget would be the most challenging it has ever had to set, said deputy leader Craig Browne and warned of having to make “some very tough choices” with no area of responsibility exempt. 

Sam Corcoran, the Labour leader of the Council, said despite several government grants, the council had not been fully recompensed for the pandemic costs, and told The Independent the axe could fall on household waste recycling centres.

Cutting family early prevention services, such as Sure Start centres, would save money now but store up trouble and costs for later, he said.

“We’ve been in austerity for a number of years and it gets harder after the easy things have been cut. Residents have to face either cuts to services or increases in council tax, or both.”

John Clarke, the Labour leader of Gedling Borough Council in Nottinghamshire, told The Independent that cuts might have to be made to the support given to police and the police and crime commissioner, as well as anti-knife crime schemes.

Other services such as maintenance of parks and open spaces could be threatened, as well as eco-friendly initiatives such as educating people on recycling and installing solar panels on council buildings.

Mr Clarke could not rule out redundancies among managers at the council, where the senior team has already been restructured through some natural job shrinkages.

Last month, Croydon Council in south London declared “effective bankruptcy” and imposed emergency spending limits.

In a survey by the County Councils Network, eight in 10 councils said they would have to make “damaging” cuts to services. Social care could be among the areas to suffer, the group said, unless the government stepped in.

A spokesperson for the LGA said: “It is not a pretty picture. Councils have worked closely with government throughout the pandemic to protect our local communities and save lives.”

As well as a drop in income from parking and leisure, local authorities are having to deal with more people defaulting on council tax and business rates because of the lockdowns. The government is giving local authorities up to 75 per cent of that lost revenue.

Overall, ministers say local government has been given £7bn to cover Covid costs, which is being paid in four tranches. 

They say councils have also been given extra spending power – but it takes the form of increasing council tax precepts for social care by 3 per cent, on top of a base rate rise of 2 per cent, totalling up to 5 per cent.

The Institute for Fiscal Studies has warned households across the UK may face an average £70 rise in council tax next year.  

The spending review also provided councils with £300m of new grant funding for social care.

David Williams, leader of Hertfordshire County Council and chairman of the County Councils Network, said: “If you had told me a year ago we’d spend about £130m we hadn’t budgeted for, I’d have thought you were having a laugh. But I’ve been astounded at the amount of support we’ve had from central government. For councils that deliver social care, the government has dealt with them pretty fairly.”

He said he would be reluctant to cut services for vulnerable families, and would look for central government funding initially.

But others say the support is not enough.

Leeds City Council, which has a £119m deficit, earlier this month announced a potential 914 staff redundancies, as well as council tax rises.

Newcastle City Council has revealed it has to save a further £40m over the next two years by raising fees and charges and not filling vacancies, and will raise council tax by 5 per cent.

Leader of Newcastle City Council Nick Forbes said: “Coronavirus has cost councils across the country over £11bn this year alone. The government have so far refunded less than half of that. They have done nothing to fundamentally change the fact that councils will be forced to make severe cuts in 2021 to balance their books.”

City councillors are considering £8.4m of cuts to adult social care spending and £3.8m of cuts to children’s social care.

Leicestershire County Council said it had an £18m gap in funding, after Westminster grants, because of the Covid crisis.  

Extra costs and loss of income have increased costs by £90m this year, it said, despite furloughing some staff.  

Byron Rhodes, cabinet member for finance, said the council was stopping non-essential recruitment and spending, and stepping up spending controls.

“Government support has been significant but not enough. Without funding reform or a major efficiency initiative, more savings will be required including service reductions.”

And Brighton and Hove council revealed it had a £20m funding gap, the “biggest black hole the council has seen for a very long time”, deputy leader Hannah Clare said.

Paul Hodgkinson, leader of the Lib Dems on Gloucestershire County Council, said he feared roads and road safety measures could be the biggest victim of any cuts in his rural area.

“Our roads have a high accident rate, sadly some fatal, with a lot of single carriageways, which tend to be worse than motorways for accidents, and I would fear measures to make them safer could be in jeopardy.”

The borough council in Crawley, the town identified has having been the hardest hit by the pandemic because it is largely dependent on Gatwick Airport, this month decided to close two children’s playgrounds and close five “superloos” among other measures.

In its budget consultation, Kent County Council said it was potentially facing a financial challenge “bigger than anything we have seen over the last 10 years”.

Leader Roger Gough said the concern was less for the immediate future than for the medium and long term. “We had an in-year budget this year, which we’ve never felt the need to do before.

“We were very concerned about children’s social care. After lockdown, cases coming in were more complex because they’d been left for longer.

“Local government tends to be a lower priority for government than the NHS and defence, so it’s likely council tax as a whole will increase – we’ll look at that very carefully. A 5 per cent increase will be a cause for concern and distress for many people already in financial distress.”

The LGA spokesperson said early communication with councils was key, and initially, the sharing of testing data with councils was poor.

“Lessons must be learnt from the past months, particularly around the importance of tapping into and using local expertise.  

“We are calling on the government to address in full the financial challenges facing councils as a result of Covid-19, including all lost income and local tax losses.”

A spokesperson for the Ministry of Housing, Communities and Local Government said: “Councils have played a critical role during the pandemic, and we are ensuring they have the resources needed to deliver effective services for their communities. 

 “We’ve given councils an unprecedented £7.2bn package of support. This includes £4.6bn in un-ringfenced funding, recognising that councils are best placed to decide how to meet the major Covid-19 service pressures in their local area. 

“Next year we’re giving councils access to an additional £2.2bn to deliver services including social care and £3bn of additional support for Covid-19 pressures. This takes the total support committed to councils in England to tackle the impacts of Covid-19 to over £10bn.”