Local councils face multi-million pound shortfalls in budgets next year

lewisham council offices
Lewisham Council face significant financial challenges due to Covid-19. Pic: Steve Cadman.

Local authorities in the Eastlondonlines area are facing multi-million pound funding shortfalls in their budgets next year if the Government does not plug the gap between councils’ increasing costs due to coronavirus and their lost income as a result of the lockdown.

An estimated funding gap of £20.2m was identified in Lewisham Council’sbudget for 2020/21 due to the impact of their Covid-19 response, which represents all of the Council’s reserves.

Councillor Amanda De Ryk, Cabinet Member for Finance and Resources, told Eastlondonlines: “Our current estimate of the impact of Covid -19 on the Council’s finances is over £50m and so far the council has received just £18m from central government.” 

“The Government promised to fund ‘whatever it takes’ to get communities through this pandemic and they must urgently do this,” she added.

Lewisham Council Cabinet were told in a meeting last week that the £18m in grants received from central government was only likely to be a third or a quarter of what the Council needs to return to a “position of financial normality”.

The full report says that a cuts program worth £16.6m which had already been agreed for the 2020/21 budget is now at risk because of the significant increase in demand for those services, including personal protective equipment (PPE), social care and temporary accommodation.

Other councils in the Eastlondonlines area are also facing considerable financial challenges, with similar shortfalls in the next year’s budgets reported in other boroughs.  

Hackney Council faces a huge £71m budget shortfall, equivalent to half of the £140m in government grant cuts the Council has received since 2010, in just one year. 

Deputy Mayor of Hackney, Councillor Rebecca Rennison, said: “Without a clear commitment from the Government to help meet the shortfall in funding, we risk seeing a health crisis followed by a public services crisis, with the biggest impact on the most vulnerable and a rise in inequality. This cannot be allowed to happen.”

A spokesperson from Croydon Council told ELL: “Like many other councils, this is costing us millions on top of existing budget pressures, with the final figure expected to far outstrip the £19.9m we’ve had so far from central government. Instead of waiting to hear how much government funding we will get, we have already set up a finance review panel formed of council executives and public sector counterparts who are examining our income, spending and savings.”

Tower Hamlets Council, who have received just £10.5m from the Government, were not available for comment but a recent report said there would be “significant pressure over 2020/21” financially.

De Ryk said: “The current perilous state of local government finances is the result of a combination of issues. A decade of austerity, the lack of leadership in addressing the rising pressures of social care (adults and children), the costs of responding to the pandemic to keep critical services running, and the repeated delays in government agreeing how the sector should be funded have undermined councils’ ability to plan for the future.”

Along with the Local Government Association and other east London authorities, Lewisham Council are lobbying the government for more funding to “avert the possibility that we would find ourselves in a position where we have to cancel non-essential services”. 

De Ryk also said that work was already underway to produce a stabilisation budget later this year, to set out changes in how the council will meet increased pressure on services and costs.

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