Paying for the pandemic

New LGA guidance raises key issues for those struggling to balance councils’ budgets laid waste by COVID-19.

Councils across the country are doing everything in their power to support their communities but we know the ongoing coronavirus pandemic has already had a significant impact on local finances.

The current and future financial implications will vary across authorities and depend on size, geography and service responsibilities. However, additional costs are expected to continue throughout the current period of lockdown and beyond.

In response, the LGA has produced guidance for finance portfolio holders on the key questions and issues they need to consider.

As a result of the additional costs of tackling the coronavirus and supporting our communities, councils are reporting cash-flow problems and we expect many to overspend against their budgets. Reductions in income from fees and charges such as car parking, leisure facilities and rental income from tenants, as well as from commercial investment, will also be contributing to the difficulties they face.

Given local councils are prevented by law from going into deficit, some of you may have already begun to think about your ability to balance your budget.

“Council budgets should be the financial expression of the needs, concerns and priorities of the local community

While guidance and funding are still evolving, the Government has so far provided councils with £3.2 billion to cover the costs of responding to this crisis. It has also made a series of announcements designed to address councils’ immediate cashflow concerns, including additional grant funding and allowing councils to postpone business rates payments to central government.

These measures are welcome, but the funding provided so far is unlikely to be enough. That is why the LGA continues to argue for government to provide additional grant funding to all councils to enable them to respond to the crisis and emerge from it with the capacity to resume local services and rebuild local economies.

Additional financial freedoms and flexibilities would also enable councils to respond appropriately to their own local circumstances and local needs.

Financial resilience has become a key issue over the past few years as councils have responded to significant reductions in grant funding and to growing demand for services prior to this pandemic.

Given the strain the crisis will place on reserves, together with any ongoing changes in council expenditure and income, the financial resilience of individual councils – and potentially the entire local government sector – needs to be reconsidered.

So while the nature, scale and level of government support is crucial, senior councillors will wish to work with officers to understand their council’s potential longer-term financial position and plan a response.

Although the focus of the LGA’s new guidance is on finance, it remains the case that local council budgets should be the financial expression of the needs, concerns and priorities of the local community.

Elected councillors and officers alike are currently concentrating much of their effort on the immediate response to the crisis, but senior councillors will also need to take time to reflect on how the pandemic will change their communities, affect the demand for services and potentially re-shape the way the council approaches workforce and service delivery over the longer term.

Local councils are known for their agility and resilience when facing difficult and changing circumstances and these skills will be tested again over the coming years.

‘Key questions and issues for finance portfolio holders during the COVID-19 pandemic’ is available at www. local.gov.uk/publications

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