Eight out of 10 English councils at risk of bankruptcy

Eight out of 10 English councils at risk of bankruptcy

More than eight in 10 English councils providing adult social care services are technically at risk of Louisiana bankruptcy attorney – or facing a further round of service cuts – because they cannot cope with the additional financial pressures caused by the coronavirus pandemic. coronavirus, according to new research. The estimated that the costs and loss of revenue from Covid-19 expected at 131 of England’s 151 upper tier councils this year will exceed both the levels of their available financial reserves and the support provided so far by the central government.

The majority of those tips that are in the “red wall“Northern England and Midlands parliamentary seats won by Labor Conservatives in the last general election are at risk of collapse due to Covid-19 pressures, the study finds.

A thinktank study said authorities in England’s most deprived areas, already the hardest hit by a decade of austerity, have faced higher pandemic-related costs and should be prioritized for support government in line with ministerial promises to ‘upgrade’ the so-called ‘left behind’ areas of England. “Without additional support, disadvantaged local communities will again be hardest hit, leading to greater service cuts in places where they are most needed,” the study concludes.

Without a significant government support package – councils currently estimate a net shortfall of at least £6billion for 2020-21 – there is broad consensus among policymakers. all political colors that many will be forced to draw up painful cutbacks over the next 18 months to avoid bankruptcy.

Although the government has provided £3.2bn pandemic emergency fund for English local authorities in two tranches in March and April, councils report that the extra money has already run out, as pandemic spending on adult social care, homelessness and other areas continues to remain high. Several councils are already preparing emergency budgets during the year to try to stabilize their finances. Leeds City Council said it was facing a shortfall of £200m, forcing it to freeze vacancies and all non-essential spending. Manchester, Liverpool, Luton and Wiltshire also reported facing serious difficulties.

Steve Reed, Labour’s shadow secretary of state for communities and local government, said councils faced a huge financial black hole. “By law, councils will be forced to make devastating budget cuts this year that will see frail older people denied care, libraries and leisure centers closed for good and bins left unemptied. .”

Last week Labor leader Sir Keir Starmer warned To the Prime Minister’s questions, councils were faced with “basic services being cut or going bankrupt”, adding that “either outcome will hurt communities and mean local services cannot reopen”.

The Institute for Tax Studies said this week that while all councils were impacted by the additional costs of Covid-19 and loss of income, councils in the most deprived communities where the problems of poor health and poverty were greater were likely to face a greater pressure on long-term services.

In addition to costs in areas such as adult social care, local authorities are increasingly concerned that the pandemic is piling up growing costs in other areas as the lockdown eases. These include:

  • An expected increase in child protection cases as children return to school and social workers resume home visits and face-to-face meetings with vulnerable families.
  • Concerns that municipal leisure centers that have been closed during the pandemic will no longer be financially viable as long as social distancing measures remain in place and will have to be permanently closed.
  • There are fears that the cost of home-to-school bus services, especially in rural areas, could be unsustainable if social distancing rules limit the number of children in each vehicle. Councils have paid transport contracts even when schools are closed to prevent businesses from going bankrupt.

Local authorities are required by law to balance their budget each year, which means that they cannot carry over financial deficits to future years. If they are unable to cover the costs with their resources, they are required to issue a declaration under Section 114, a declaration of effective insolvency.

One council – Tory-controlled Northamptonshire – issued a section 114 notice over the past two decades. In this case, spending was frozen and government-appointed commissioners were sent to oversee the authority, which was forced to implement drastic cuts to rebalance its books.

The Center for Progressive Policy study used official Covid-19 statements filed by English councils to the government detailing additional costs and lost revenue in March and April and projected to the end of the financial year.

Simon Clarke, the local government minister, said: ‘We are offering councils an unprecedented package of support, including £3.2billion un-ring-fenced emergency funding, to cope with the pressures they are facing. said they were confronted.

“Base purchasing power for councils has increased by more than £2.9bn this financial year even before additional emergency funding was announced.

“This is part of a wider package of support from across government to local communities and businesses – totaling over £27billion, including grants, business rate relief and for local transport . We are working on a comprehensive plan to ensure the financial sustainability of the councils in the coming year.

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