Councils warn of £10billion cash black hole as Robert Jenrick pumps an extra £500m into authorities

Robert Jenrick sparked a row with local government this morning after announcing plans to pump an additional £500million into council coffers today.

The Communities Secretary said the cash would go towards covering lost income during the coronavirus lockdown, which has seen mothballed firms given business rate holidays and forced other cuts to income.

It is part of a £4.3billion package of support put in place by the Government and is not ring-fenced and allow council and business rates tax deficits to be repaid over three years instead of one.

The Government said it understood the ‘unprecedented impact’ the pandemic has had on councils’ income from car parks, museums and other cultural assets, and will compensate them.

Mr Jenrick said that to ‘boost cash flow’ any loss of income above 5 per cent of the planned take from sales, fees and charges will be compensated at a rate of 75p in every pound.

But it comes as as councils warn they face a black hole of up to £10billion because of lost income and increased expenditure to deal with coronavirus.

The cash equates to less than £1.5million for each of the 343 local authorities in England – with extra money for those in Scotland and Wales.  

It comes after Tory-run local authorities last week warned the Government they face possible bankruptcy if a second wave of coronavirus forces the UK into a new lockdown.

Nick Forbes, the Labour leader of Newcastle City Council, addressed Mr Jenrick and Boris Johnson on Twitter, writing: ‘I’m sorry, this £500million goes nowhere near filling the £10billion funding gap councils face this financial year. 

‘We’ve been giving you the benefit of the doubt up until now, but our patience is wearing very thin.’

Shadow communities secretary Steve Reed said ‘Many councils are on the brink of bankruptcy because of the costs of tackling Covid-19, so any help is welcome.

‘But if the Government breaks its promise to fund the costs in full, councils will be forced to cut back services like social care, youth activities and bin collections, and closed libraries and leisure centres might never reopen.

‘This funding is a start, but we don’t know how it will be shared out and much of the detail is being held back until the autumn which might be too late to save many frontline workers’ jobs that are now at risk.

‘We urge the Government to stick to its promise to support councils to do what’s necessary to get communities through this. Councils have kept their part of the bargain, now the Government must do the same rather than punish local communities with cuts to the services they rely on.’

And James Jamieson, chairman of the Local Government Association, said: ‘Councils continue to work all day and night to protect the most vulnerable from COVID-19, support local businesses and try and keep normal services running. This package offers some positive measures and recognises the pressures councils are facing, but more is desperately needed to fully address the severe financial challenges facing councils and our local services as a result.

‘The Government’s commitment to fund a portion of councils lost income from fees and charges is a step in the right direction. However, this does not cover the full losses, nor does it extend to commercial and other income losses and is likely to still leave councils having to absorb a substantial and unforeseen loss of funding, in particular the loss of local taxes.

‘We reiterate our call to Government to meet all extra cost pressures and income losses from fees and charges and other sources, including commercial activity, in full if councils are to avoid having to make tough decisions on in-year cuts to services to meet their legal duty to set a balanced budget this year.

Mr  Jenrick MP said: ‘Councils are playing a huge part in supporting their communities during this pandemic.

‘From supporting the most vulnerable and keeping vital services running to operating local track and trace, council workers have been at the forefront of this great national effort and are the unsung heroes of this pandemic.

‘Today I am providing a further package of support that takes our support for councils during this pandemic to £4.3 billion to help meet the immediate pressures councils are facing.

‘I know that the loss of revenue from car parks and leisure centres has created huge difficulties, so I am introducing a new scheme to help cover these losses.’