Region's council tax income plummets by more than £11 million during pandemic

Councils across England are facing a combined deficit of more than half a billion pounds for the 2020-21 financial year, after council tax intake plummeted in the majority of areas.

Data from the Ministry of Housing, Local Government and Communities (MHCLG) shows councils in Wolverhampton, Dudley, Sandwell, Walsall, Stafford and Cannock will have to address an estimated shortfall of £11,499,766.

But South Staffordshire Council is among a minority not facing a shortfall in council tax income amid the pandemic – the authority expects to see a surplus of £1,346,389 in its collection fund for the period.

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A government scheme should help to plug the funding gap, while the deficit will be spread over three years and split between the area's police and crime commissioner, the local fire service, and each council as billing authority.

But the “financial hole” caused by a drastic fall in anticipated income to each authority’s collection fund could cause resource and budget pressures for years to come.

The Chartered Institute of Public Finance and Accountancy, a trade body, has warned that the end of government-funded Covid support could make it even more difficult for councils to repay the deficit.

The collection fund represents income and expenditure relating to council tax and business rates, with estimates used to help set local authority budgets.

In response to the pandemic, the Government asked councils to estimate the impact of Covid-19 on the collection of funds for 2020-21.

Just 41 local authorities expect a surplus in council tax income while more than 250 reported estimated deficits of between £14,000 and £17 million.

Reimbursed

There were 10 councils that indicated they were not in deficit, but did not report surplus figures.

The national anticipated deficit across all councils in England rises to £546 million when surpluses are not taken into account, the data shows.

But the figures do not reflect councils' overall financial position after other funding and spending is accounted for, nor the impact of the tax income guarantee scheme announced by the Government in November.

Under this scheme, local authorities will be reimbursed for up to 75 per cent of irrecoverable council tax and business rate losses, with payments expected to begin in the near future.

Rob Whiteman of the CIPFA said this will compensate councils for a “large chunk” of the deficit.

He added: “Ultimately, this financial hole isn’t as deep as it looks.

“But with the Government ending Covid support by the end of the year, it’s hard to see how councils will be able to afford to repay the remaining deficit without additional ‘help’ from taxpayers in the future.”

Separate MHCLG figures show that, across England, council overspend due to the pandemic totalled around £6.9 billion in March, while losses were calculated at around £5.1 billion.

Compensate

An MHCLG spokesman said: “We’ve committed over £36 billion to help councils support their communities and local businesses during the pandemic.

“We’re also providing councils with £670 million of new grant funding to enable them to continue reducing council tax bills for those least able to pay, including households financially hard-hit by the pandemic.”

Stafford Borough Council saw a drop to its portion of the bill of £75,000. Spokesman Will Conaghan, said: “We are a well-run authority and have produced a balanced budget despite the ongoing financial difficulties incurred as a result of Covid.

"We will continue pressing central Government for support to compensate for losses, and increased spending, associated with the pandemic as we still don’t have a full picture of the financial effects of Covid across all areas of our community. But we already have work underway to help our community’s economic recovery from Covid-19 and ambitious plans for future growth and investment within the borough.”

A spokesman for Cannock Chase Council said: “It is difficult to determine the ongoing impact of Covid -19 on finances in local government at the moment. The potential shortfall for 2020-21 for this council alone amounts to just under £60,000 and this has been reflected in our financial plan. As to be expected, we are monitoring the situation on a month-by-month basis.”

Councillor Steve Clark, cabinet member for finance and legal at Dudley Council, said: “We have received favourable government grants which will cover much of any deficit in council tax income. We will also be monitoring the situation and working to reduce any deficit further, before setting the budget next year.”

Sandwell Council’s Cabinet Member for Finance, Council Sustainability and Transformation Councillor Wasim Ali said: “We are aware of the impact that Covid-19 has had on Council Tax income for the authority and we are taking this into account in our budget planning process for the next three years.”