Covid economic downturn

IFS: Councils could face £3.2bn shortfall post-Covid-19

The IFS has today (Sept 24) released a report that outlines how Councils could have a £3.2bn shortfall even after the Coronavirus crisis.

The report has been jointly funded by Economic and Social Research Council and the Local Government Association.

The report uses 3 models to estimate the economic implications of the Coronavirus pandemic on local Councils.

The report’s middle forecast shows that if Councils increase their council tax by 2%, the current default increase without public consultation, there would still be a shortfall of approximately £3.2bn.

The upper scenario predicts a shortfall of over £7bn.

The shortfalls are mainly because of an increase in spending rather than a decrease in revenue, with revenue increasing by 4% but spending increasing by 11%.

The report stresses that it is difficult to accurately predict the shortfall because nobody knows how quickly Council’s income will recover and how the demand on pubic services may be affected by Covid-19 in the long term.

The IFS predicts that post-Covid, there will be a particular increase in adult’s and children’s social care needs.

Cllr Richard Watts, Chair of the Local Government Association’s Resources Board, said:  

“As we finalise our detailed Comprehensive Spending Review submission to the Treasury, it is clear that securing the long-term sustainability of local services must be its top priority.  

“This helpful report will support our firm case to government that councils need certainty over their medium-term finances and adequate funding to tackle day-to-day pressures and the lasting impact of COVID-19 on income and costs.  

“In the coming weeks and months we will be setting out how, with the right funding and freedoms, councils can provide local services which communities rely on and grasp the opportunity to address the stark inequalities the COVID-19 pandemic has exposed, develop a green recovery, address skills gaps and rebuild the economy so that it benefits everyone.”

PSE Oct/Nov 20

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