Hackney Council is bracing itself for a budget black hole of £9m this financial year, even after government support, because it did “the right thing” during the coronavirus pandemic.
The pandemic and subsequent lockdown saw government give the council more than £21 million in emergency funding and, it announced a plan to partially compensate council losses. The scheme could add about 9.5million of additional funding alongside various other funding streams.
But Hackney’s Deputy Mayor and Finance Chief Cllr Rebecca Rennison has warned that the council will be facing “tough choices” about services unless long-term support is provided by government.
She told the Gazette: “After months of refusing to honour its commitment to do ‘whatever it takes’ to support local authorities, the government has now provided some additional funding and arrangements to recover lost income, but it won’t be enough.”
Before government support ,the estimated and significant budget gap for the current financial year is predicted to be £61m.
That figure is equivalent to nearly half of the £140m in government grant cuts the council has received since 2010.
Cllr Rennison emphasised the large scale of the losses felt by the council over a single financial year.
She said: “Coronavirus has had a huge impact on Hackney, on families, our borough and also on council finances as we’ve created new services, including supporting residents most in need.
“It has lost huge amounts of income as we’ve provided Council Tax and Business Rates discounts and rent holidays for our own commercial tenants.”
Cllr Rennison stated, in a council cabinet meeting report on July 20, that after a decade of austerity council income has been “decimated”. She also mentioned additional costs brought on by the pandemic which have included “everything from additional staff to patrol parks to food parcels for residents who need them”.
The councillor added: “We can’t let a public health crisis become a public services crisis, and we’ll continue to make the case to ministers to properly fund essential frontline services, and the key workers that provide them, at a time when they are needed most.”
Meanwhile, the government said Hackney and other local councils have received unprecedented support.
In addition to Hackney Council receiving more than £21 million in emergency funding, the local authority, according to the government, saw a core spending power increase of more than £15 million in 2019/20 before additional funding was even announced.
A Ministry of Housing, Communities and Local Government (MHCLG) spokesperson said: “We’re giving councils unprecedented support during the pandemic to tackle the pressures they have told us they’re facing. This includes £4.3 billion funding, compensation for irrecoverable income losses and a scheme allowing them to spread their tax deficits.
“For relevant losses of sales, fees and charges, over and above the first 5% of planned income, we’re covering 75p in the pound for revenue they haven’t been able to generate in areas including parking fees and museum entry.
“For many councils, this will be a significant portion of their income lost as result of the pandemic.
The government says the scheme is part of a package of almost £28 billion which will be used to support local areas, with funding going to councils, businesses and communities in need.
“We will continue to work closely with councils as they support their communities through the pandemic,” said the MHCLG spokesperson.
READ MORE: Coronavirus: Hackney Council appeals for government to bridge £19 million funding gap
Despite funding and government announcements touting how it will support young people and others at risk of long-term unemployment Cllr Rennison is still concerned that its plans “can only partially mitigate against the devastating impact” of Covid-19 across communities, businesses and council services”.
The council’s report from a cabinet meeting on July 20 shows estimated budget shortfalls of thousands of pounds for vital services caused almost entirely by Covid-19 and massive losses in council revenue.
The report also states that “it looks likely” that the UK faces a “significant recession, possibly its sharpest recession on record”, and that the country’s debt is now worth more than its economy after the government borrowed a record amount in May.
£21m of the £61m shortfall estimated for this year, before government support, has arisen from Council tax and Business Rates. The government are proposing that this shortfall is recovered through the Collection Fund over the following three financial years. Therefore, the council has concluded this figure has no impact on the 20/21 budget and it has not been included in the £9m shortfall after government support.
To read the full report click here
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