Councils face £10bn funding hole following Covid-19

Stockport Council is facing “economic Armageddon” following a national funding shortfall, its MP has said.

Navendu Mishra, who is the Member of Parliament for Stockport, has spoken out about a national £10bn black hole caused by the coronavirus crisis that is leaving the local authority with debts of up to £25m.

With the cost of the pandemic response estimated to have cost Stockport Council £41m, the Government has so far only committed to providing £16m in emergency relief.

Local Authorities have been at the forefront of tackling Covid-19, providing community support and health and social care services. Ministers earlier in the crisis told the chair of the Local Government Association’s community wellbeing board that the Government would provide “whatever funding is needed for councils to get through this and come out the other side”. However, ministers are now back-tracking, leaving councils facing a £10bn funding gap.

Councils are required by law to balance their budgets meaning that the extra spending through Covid-19 will have to be cut from existing services if the shortfall is not covered by the Government.

In Parliament this week, Mr Mishra challenged Chief Secretary to the Treasury Stephen Barclay to provide assurances that care staff, refuse collectors and social workers will continue to be funded once the current lockdown is over given the financial predicament that councils such as Stockport are currently in.

Although he talked about funding to date in his response, the Minister was unable to confirm that workers would be protected once the quarantine measures have been eased.

The impact of Covid-19 is projected to create additional financial pressures of £10bn to £13bn for councils. To date, the Government has allocated just £3.2 billion, meaning councils will have to make a 21% funding cut across the board.

Social care currently accounts for around half of local council’s total expenditure leaving MPs concerned that this sector will be hit the hardest. Analysis by the Labour Party predicts that councils will need to cut around £3.5bn to adult social care services as well £2bn to children’s social care and £700m to public health. Stockport Council is facing economic Armageddon if the Government fails to honour its commitment to pick up the tab for the cost of the coronavirus crisis.

Navendu Mishra said:

“If left with a £25m shortfall due to its Covid-19 response, Stockport Council will be left with no choice but to cut services, which could include adult social care places and other health provision at a time when they are needed the most.

“It’s unacceptable that, having stepped up to support our community during this pandemic, the council could now be left to face financial ruin.”