Council leaders call for £5bn income guarantee backed by Treasury

Leaders of the biggest councils in England have called for a ‘£5bn income guarantee’ from Government to help them make it through the crisis period.

Local authorities are at risk of having to declare insolvency as the pandemic continues and more pressure is put on the delivery of public services, and feel an ‘income guarantee’ is needed to safeguard them.

The call comes through the County Councils Network (CCN), which represents 36 local authorities in England, as they highlighted the severe uncertainty on the future income of these organisations.

Deferral of council tax payments and growing cost pressures are two examples of the factors impacting councils’ fears of issuing a section 114 notice.

The notice would result in no new expenditure permitted within the council, with only the continued running of statutory services and essential spending in place.

The estimated lost income from the 36 CCN councils is around £430m from fees, charges and other income, with further pressures from non-payment of council tax and business rates.

Council tax accounts for over half of the county authorities’ income in normal times, with the average of the 36 councils at 56%.

The representative body is urging Government to work with councils to design a ‘comprehensive strategy’ to protect council finances, involving income guarantee backed by the Treasury initially set at £5bn in addition to emergency funding.

The call comes two months after ministers wrote off £13bn of NHS debt due to the pandemic, despite this pre-dating the crisis.

Cllr David Williams, chairman of the County Councils Network, said:

“The government is alive to the financial challenges facing councils as we battle Coronavirus on the frontline in our communities. The grant funding provided so far is very welcome and provides vital resources to meet immediate cost pressures, recognising that councils have done much of the heavy lifting during this pandemic, from protecting the vulnerable and taking the strain off the NHS.

“The government has given comprehensive protection to the health service and businesses and we want to work with government to deliver the same for councils. However welcome one-off injections of resources have been, councils cannot budget on verbal reassurances alone and therefore now is the time for the government to step forward with firmer financial guarantees to stem fears that councils will have to declare insolvency. 

“By setting out an initial guarantee of £5bn, this will provide councils with the confidence and means that they need to spend what is required to defeat the spread of the virus, save lives and support private enterprise to drive the economic recovery.

“CCN is committed to working with ministers to design a comprehensive package of support, ensuring the best possible data and validation of our financial pressures to reassure government they are only funding genuine costs and lost income resulting from the crisis.”