Cambridgeshire councils say pandemic could cost them more than £100million
PUBLISHED: 12:25 14 July 2020 | UPDATED: 12:25 14 July 2020
Cambridgeshire’s councils have estimated the pandemic may cost them more than £100 million collectively this financial year.
Part of the costs and losses incurred will be covered by central government, but concerns have been raised that support will not cover the full amount.
Returns purportedly sent to the Ministry of Housing, Communities and Local Government from around the end of June seen by the Local Democracy Reporting Service reveal the combined financial pressures on the seven Cambridgeshire councils.
They show end of year estimates for additional spending pressures, such as additional expenditure and savings foregone, which total £75million across all seven councils.
They also show lost income totalling around £34million, exluding potential losses from reduced council tax and business rates.
All councils have also received emergency extra funding to cover some of the costs and losses.
Overall the government has provided around £45million in extra funds for Cambridgeshire councils as part of a £3.2billion national fund to mitigate the pressures associated with Covid-19, with a further £7.8million for the county’s infection control fund, and an unspecified share of a further £500million to be shared out among England’s more than 340 local authorities in an as yet unspecified way.
The government has also said that where losses on sales, fees and charges income are more than 5 per cent of a council’s planned income, the government will cover them for 75p in every pound lost.
In each councils’ case the figures are a snapshot of a fast-moving situation, but they demonstrate the disruption caused to council budgets, which are tightly controlled to make sure they are balanced at the end of each year.
While calculating the total impact on councils’ finances is not necessarily as simple as subtracting the extra government support funds from additional costs and lost income, many Cambridgeshire councils are forecasting budget deficits this year owing to the pandemic and susequent lockdown.
In the returns from around the end of June, Cambridgeshire County Council estimated a spending pressure of £44.7million, and lost income of £8.6million. The council has received extra funding of £26million from the national £3.2billion support fund.
But the impacts of Covid-19 have left the county council’s actual estimated deficit at £12.7million, according to the latest report for the council’s General Purposes Committee on July 14, where councillors will discuss the financial situation.
This is because in the county council’s case it has received further additional funds relating to Covid-19 support, including an expected reimbursement from the NHS for procuring extra care beds during the height of the outbreak.
The county council documents show a “cautious estimate” for its share of the extra £500million announced at the beginning of July could be around £3million, which would still leave the council with a considerable shortfall of just under £10million.
In the end of June returns, East Cambridgeshire District Council has estimated a spending pressure of £400,000, and lost income of £1.2million. The council has received extra funding of £900k.
Cllr David Brown, Chairman of East Cambridgeshire District Council’s Finance and Assets Committee said: “We can confirm that the estimated figures were correct when published. While these are the figures that appeared in a recent government return, more up-dated figures will be presented in a report to full council on the July 16, which shows expected additional costs at around £0.3 million.
“The Covid-19 pandemic is an unprecedented situation that has had global financial implications.
“For all councils there will be expected losses, but it is not possible to quantify this with any certainty at this stage. It will depend on the length and severity of the pandemic and any further lockdown measures that may come. It also depends on how quickly the economy bounces back.
“Losses from council tax, a drop in income from business rates and a relatively small decrease in car parking income and other fees and charges are scenarios that we are preparing for.
“As awful as this situation has been, compared with other areas East Cambridgeshire has not been as badly affected. Thanks to action taken over recent years the council went into this situation with a sound financial base and we have a balanced budget for the next two years.
“This means we have not been impacted to the same degree by the financial issues linked to rough sleeping and major drops in car parking incomes which have badly affected other district councils.”
In the end of June returns Fenland District Council has estimated a spending pressure of £2.3million, and lost income of £1.9million, and has received extra funding of £1million.
A spokesperson for Fenland District Council said: “In the wake of the Covid-19 pandemic, councils across the country have faced unprecedented pressures on their finances and Fenland District Council is no different.
“The council has mobilised its business continuity plan to ensure that there is minimal disruption to our services and we remain fully committed to the health and safety of both our employees and our communities.
“The Government has announced a further £500 million in financial assistance will be made available to local authorities to address spending pressures with additional compensation available in recognition of lost income.
“Where losses are more than 5 per cent of planned income from sales, fees and charges, the government will cover 75p of every £1. At this point in time our allocation of this financial assistance has not been determined.
“This announcement will also allow councils to account for council tax and business rates deficits over three years instead of one.
“We will be taking a budget update to our cabinet and full council in August when the situation should be clearer. Further pressures in regards to council tax and business rates are anticipated however we are currently waiting to see the full impact on our collection rates.”
The returns sent to MHCLG around the end of June also show Peterborough City Council has estimated additional spending pressure of £24million including extra expenditure and savings foregone, and lost income of £6.9million. The council has received an additional £11million in government support and around £1.8million from the infection control fund.
Peterborough City Council documents for its cabinet meeting on July 13 say the council is currently forecasting an overspend of £6.3million this financial year, which factors in the estimated impact of Covid-19.
Across the five district councils the estimates put additional spending pressures, such as additional costs and savings foregone, at a combined total of £6.32million, and lost income at £18.97million. The extra government funds currently add up to £7.3million.
Lost income includes money lost through parking and other charges, commercial investment, council-run services, and other revenue streams.
A spokesperson for MHCLG said: “The government has delivered an unprecedented package of support to councils over recent months, with a £4.3billion package, including £3.7billion of un-ringfenced grants and the £600million Infection Control Fund, to help them to tackle the spending pressures they have told us they’re facing.
“Cambridgeshire councils received £45 million of the initial £3.2 billion to deal with the pressures of coronavirus, while its core spending power rose by £39 million this financial year even before additional emergency funding was announced.
“Additionally all seven councils in Cambridgeshire will receive a share of the extra £500million support package announced last week, and the government is introducing a co-payment scheme to cover irrecoverable sales, fees and charges income lost by councils during the pandemic.”
A number of district councils have also warned of the impact of reduced council tax and business rate collections in the future.
In the end of June returns, Cambridge City Council has estimated an additional spending pressure of £1.3million, and lost income of £7.5million by the end of the financial year. The council has received £1.8million from the government in additional support.
Last month the council forecast a budget deficit of approximately £9.8million owing to the increased financial pressures of the pandemic.
The city council’s executive councillor for finance, Labour’s Richard Robertson, said: “The figures quoted [at the end of June] are our estimates for our extra costs and income lost for the current financial year.
“Any shortfall in rates and council tax income will be accounted for the following financial year and the government has suggested that there will be financial assistance with that if required.
“Unfortunately we cannot rely on such support being made available by the government.
“Cambridge City Council responded to the government’s call for homeless people to be given special help in the face of the threat from pandemic. This group of people were especially vulnerable to the virus. “We estimate that we are incurring extra costs and loss of income of almost £10million yet so far we have had only £1.8million in grant and furlough recovery from the government.
“Just our cost of providing homeless people with housing amounts to £1.2million.
“It is still too early to determine what level of shortfall we will face in collection of council tax this year. Unlike most other councils our Council Tax Reduction Scheme is based on supporting up to 100 per cent of council tax. It is very effective in helping people on benefits and low pay.
“Councils have also been given government funds to support council tax payers with up to £150 of extra support this year. There could still be an overall shortfall in payment depending how employment levels hold up in Cambridge once furloughing support for employees and the self-employed is ended.
“Pressure from any shortfall in business rates is also too early to tell. In any case although we collect business rates we only retain a small percentage of this, perhaps 5 per cent or 6 per cent, with the rest going to the government and county council.
“Businesses in the retail, hospitality and leisure sector have had their rates bill this financial year cancelled by the government which will make up to councils the cost of this write off.
“In summary we are likely to face some pressures from loss of rates and council tax and face an unpredictable and unreliable level of support from the government”.
The end of June returns show South Cambridgeshire District Council has estimated an additional spending pressure of £900,000, and lost income of £1.5million, and has received extra funding of £1.6million.
However the council disputed the figures when approached by the Local Democracy Reporting Service, saying its additional spending pressure is not £900,000 but actually around £818,000, with around £468,000 of additional spending and £350,000 in delayed savings.
South Cambridgeshire District Council’s Lead Cabinet Member for Finance, Cllr John Williams, said the “biggest issue” financially is likely to be a drop off in business rates, but said he is “confident we will weather the storm”.
Cllr Williams said: “We expect our biggest source of lost income to be from reduced business rate payments as a result of local companies suffering financially from the Coronavirus outbreak.
“We know it’s incredibly tough for businesses out there and want to do all we can to support them.
“There is no indication as to how long this will last for and this is the biggest issue for us. Like any other business we are still suffering from the shock of the pandemic and continue to work through the impacts, both for us as a council and for our residents.
“We are incredibly proud of our response of the last few months and grateful for the support of our partners in making sure that every village and settlement in the district had a comprehensive response – ensuring everyone who needed support received it.
“Inevitably this has created financial pressures, but the we entered the pandemic with a solid financial position and I’m confident we will weather this storm.”
In the end of June returns Huntingdonshire District Council has estimated a spending pressure of £1.3million, and lost income of £6.8million. The council has received extra funding of £1.8million from the government.
A spokesperson for Huntingdonshire District Council said: “Huntingdonshire District Council continues to closely monitor the financial impacts that the Covid-19 pandemic is having and the effects on our district’s residents and businesses.
“The district council went into this situation in a healthy financial position due to robust and sensible financial management over the course of many years. Due to this robust management, the council started from a strong financial position before the pandemic period took hold and as such is much better placed to make the right decisions throughout these difficult times.
“Due to the Covid-19 pandemic, spending has been directed to support residents, businesses and organisations to ensure the best outcomes possible for as many of these as we can. Almost all of the council’s vital public services are continuing to operate at normal pre-Covid levels, including paying benefits, providing housing support and waste collection services.
“Combined with additional responses such as allocating and distributing financial grant support for local businesses, HDC has shown what a well-managed council, with strong financial controls can achieve.
“The financial landscape of local government will continue to evolve as we transition into the recovery phase of the response and therefore any financial pressures that the council faces will be dealt with in a considered manner to ensure a minimum impact on services, residents and businesses.”
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