Road to disaster?

By Judith Blake | 20 May 2020

In Yorkshire, as elsewhere, the public sector response to this crisis is unlike anything seen in this country since the Second World War and councils are at the very forefront.

Council staff have been praised as ‘unsung heroes’ by central government, with many working seven days a week to provide a lifeline for the vulnerable and to keep vital frontline services running.

Councils have taken a lead role in coordinating the efforts of partners in the emergency response across district areas. Our social care teams have belatedly been recognised for their immense contribution; our refuse workers have continued to collect bins containing 20% extra waste; we have got vast sums of business support grants to where they are needed; we have coordinated emergency volunteer hubs and food supplies – the list goes on.

The response has been incredible but the pandemic has come at a big cost. It is no exaggeration to say many councils now face financial ruin.

The immediate impact of the pandemic for councils in the Yorkshire and Humber region alone is currently estimated at around £600m. My own council – Leeds City Council – estimates a loss of income this financial year of more than £100m.

The lost income is a much greater threat to our financial viability than the additional spend we’ve committed to the COVID response, significant as that is. The reliance of councils on income from council tax, business rates and fees has increased substantially since 2010 due to reductions in grant funding, so the sudden drop in income threatens to be catastrophic.

The problem is compounded by a number of factors, including a large increase in the number of people who need council tax support and an inability to finalise planned asset sales.

Following a decade of austerity, many councils don’t have any sensible efficiencies left to deliver. Reserve levels are perilously low and in no way high enough to even partially plug the gap.

With a huge proportion of income vanishing almost overnight, many councils now face the prospect of having to issue s114 notices. There is the very real possibility that every council in Yorkshire will have to do this. We are talking about councils that have been very sensibly managed financially through austerity but are now quickly running out of options.

This loss of income is not a short term issue. The impact of council tax and business rates shortfalls will be felt next year and the consequences will extend over a number of years while the economy takes time to recover. We have a diversity of rural and urban councils in Yorkshire and all will be affected by this. Business rates will contract further, with an increasing number of businesses likely to go into liquidation, an increase in the bad debt position and a growing number of appeals and claims for relief.

Without significant additional central government support vital services for vulnerable people will be cut back – services for the very people who have suffered most through this crisis. The scale of the crisis means social care will inevitably be hit hard too. The social care funding announced recently is a mere drop in the ocean.

There is a real possibility that thousands of jobs will be lost, shamefully including the jobs of those unsung heroes ministers have been so quick to praise.

This unprecedented situation requires a radical emergency response from central government to avert disaster. Welcome though it is, the additional funding made available so far that has helped with our immediate expenditure is wholly inadequate to deal with our income losses.

We need a funding agreement that responds to the true scale of the financial impact of the pandemic. A key component should be to underwrite loss of income from business rates and council tax. Given the deferral of fairer funding and business rates reforms, this would provide short term stabilisation of budgets and allow councils to plan with a degree of certainty for the coming years of economic recovery.

Some economists are predicting the worst recession since the Second World War. Communities across Yorkshire and elsewhere will need their local council to run vital support networks to protect the most vulnerable from further extreme hardship and suffering.

Those same communities will need their councils to lead the economic recovery. Central government must act now to make sure we still exist to do so.

Cllr Judith Blake is leader of Leeds City Council

2020 could be the year local councils start to roar

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