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£1.6bn boost for struggling local authorities as cash flows come under pressure

20 April 2020: Government announces another £1.6bn for local authorities in England, plus £300m for Scotland, Wales and Northern Ireland.

On Saturday 18 April 2020, the Ministry of Housing, Communities & Local Government (MHCLG) announced a second £1.6bn emergency funding package for local authorities, taking the total for councils across England to £3.2bn.

This was accompanied by additional amounts of £155m, £95m and £50m respectively for the devolved administrations in Scotland, Wales and Northern Ireland.

This announcement was in addition to a decision on Thursday to ease local authority cash flows by deferring the payment of £2.6bn in business rates owed to central government and by accelerating £850m in social care grants due to councils for the first financial quarter to June.

Councils across the country are reporting significant cash flow difficulties, with the Local Government Association claiming that without a guarantee of funding some councils may be subject to section 114 ‘bankruptcy’ notices freezing all non-statutory expenditures.

Council tax receipts are falling as householders in lockdown cancel their direct debits, while income from fees and charges, including car parking, planning fees, leisure facilities and local markets, have all but dried up in most cases.

Meanwhile spending has soared as councils have sought to support vulnerable residents and the homeless, as well as continuing to run public services in a very different and more complex environment. Councils are not eligible for the Government’s furlough scheme and so continue to bear the full cost of staff that can’t be redeployed to other activities, while a substantial number of staff are self-isolating, putting further pressure on those that are working.

The announcement by MHCLG of additional funding was accompanied by a letter to all councils from the Secretary of State, Robert Jenrick, thanking the local government workforce and praising them for their efforts during the coronavirus pandemic. This was followed on Sunday with an update to Government’s coronavirus guidance page for local government.

Despite this increase in funding, the Local Government Association continues to be concerned that cutbacks in services may still be necessary to balance budgets later in the year.