Coronavirus budget gap equivalent to half of austerity cuts, report reveals

The Government must commit to covering the full costs of vital support for vulnerable families and plunging incomes from normal council services to avert a crisis in public services when they are most needed, a Hackney Council report has set out.

Additional spending on key frontline services during the pandemic, coupled with losses in Council Tax, Business Rates and other income, means the Council faces a £71million budget shortfall this year. 

The funding gap is equivalent to half of the £140m in government grant cuts the Council has received since 2010 – in just one year. 

So far, the Council has received just £17.7m from the Government in emergency financial support – with ministers U-turning on promises to spend “whatever it takes” and only committing to funding a handful of select services for a short period, and often at inadequate levels. 

The report, considered by the Council’s Cabinet, emphasises that while there is no immediate risk to Council services, the scale of loss of income the Council faces means maintaining existing levels of service will be impossible without further government funding.

It also sets out concerns that a change in the Government’s approach to measuring the impact on council finances – asking authorities to report on the full year impact on the assumption that finances return to normal from the end of July – is designed to mask the true level of funding shortfalls facing local government across the country.

While not detracting from the work of the NHS, local authorities, along with others, are also part of the frontline in leading the fight against coronavirus and doing everything we can to keep people safe and our local economies going. We have honoured our commitment to do what was needed, and we now need the Government to honour theirs. 

Instead they seem more focused on a war of words and double counting to try and downplay the impact on local government finance. We are prepared to have a grown-up conversation about the challenges facing us and practical measures, alongside funding, the Government could put in place to help address these. We need a commitment from the Secretary of State that he will provide the leadership needed and will take on the role of local government champion rather than critic.

As this report sets out, 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.
Deputy Mayor Cllr Rebecca Rennison, Cabinet Member for Finance, Housing Needs and Supply

Government funding provided so far has also been inadequate for the specific services it has said it will fund, such as £10,000 to support 150 rough sleepers in emergency accommodation for the foreseeable future.

Examples of the additional £27m spending the Council is forecasting include: 

  • Increased adult and children’s social care costs

  • Providing PPE to social care and other staff

  • Delivering thousands of emergency food parcels every week to residents who cannot leave their homes or need support

The £44m expected to be lost in income includes: 

  • Nearly £20m in Council Tax and Business Rates

  • More than £9m in sales, fees and charges – due to the closure of facilities such as leisure centres and other venues

  • Rent arrears and other cuts to commercial income

For more information, read the full Cabinet report.