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The £90 million black hole facing Lancs councils due to Covid-19

Written by on June 10, 2020

Coronavirus has had a devastating effect on the British economy.

With the country entering lockdown on March 23, a national – and international – recession has been deemed likely by many, including Chancellor of the Exchequer Rishi Sunak.

It is why pressure has mounted to reopen ‘non-essential’ businesses quicker than first anticipated, with many expected to open their doors from next Monday (June 15).

Pressure is also growing for parts of the hospitality industry to reopen their doors, if social distancing can be maintained.

But as well as the private sector, coronavirus has resulted in a huge blow to the coffers of councils running essential services up and down the country.

From social services to bin collections and road repairs to schools, councils have kept working through the coronavirus crisis under enormous pressure.

But despite the continued efforts of councils across the red rose county, a funding black hole of £93.5 million has been identified by the authorities.

The worst hit is Lancashire County Council, with a funding black hole of £48 million reported.

Blackburn with Darwen Borough Council is reporting a loss of funding gap of £16m, while Lancaster City Council projects it could be up to £9.1m in the red due to the pandemic.

LancsLive has approached each Lancashire council for an up to date take on their finances. Those who replied can be found below.

Six councils did not respond to our enquiries, meaning that unfinanced costs to local authorities could be closer to, or upwards of, £100m.

Here is a round up of the financial situations facing Lancashire’s councils due to the coronavirus pandemic:

Blackburn

Blackburn Town Hall
Blackburn Town Hall

At Blackburn with Darwen Borough Council, an eye-watering £16 million funding hole has been identified by council bosses.

It’s budget for the year is £143 million, which has been boosted by £9.29 million through additional coronavirus funding from central government.

And the authority’s reserves stand at £7 million as of March 31, leaving it almost £10 million shy of breaking even.

“We are lobbying with the whole of local government for more funding to be made available so we can continue providing essential services and support residents at this time,” a council spokesperson told LancsLive.

In May, Councillor Mohammed Khan OBE, Leader of Blackburn with Darwen Council, warned that its finances will not stay steady if its loss of income is not “fully covered”.

Lancashire County Council

Lancashire County Council (Image: Copyright Unknown)

Lancashire County Council, which runs a number of services across the county including education, roads, and waste and recycling centres, is projecting a loss of £48 million due to coronavirus.

Its overall Covid costs stand at £104m, but this has been more than halved due to a government grant totalling £56m.

Overall costs had stood at £120m but were reduced in the monthly review between April and May.

County Council leader Geoff Driver had previously called for the government to foot the bill in full.

And he said that the reduction in costs has been put down to the government telling county councils to not include estimated losses from council tax and business rates into their budgets – because they are being reported by the district and city councils which collect the money before it is then redistributed.

The county council receives the vast majority of council tax in Lancashire – excluding Blackpool and Blackburn with Darwen.

He said: “Next year there will be a big deficit on the collection [of council tax] and we’ll have to stand that.”

But LancsLive understands there is no plan for an emergency budget at this stage, with current plans lasting until February 2021.

Blackpool

Blackpool Town Hall (Image: Andrew Teebay/Liverpool Echo)

Blackpool Council has reported a funding black hole of £8.4 million.

Its financial report submitted to central government on May 15 revealed a total cost of £21.9m as a result of coronavirus; something that was reduced by £9.9m of Covid-19 support grants of £3.6m of Enhanced Hospital Discharge grants.

Council leader Simon Blackburn said: “Blackpool Council’s foremost priority is to ensure that we are doing everything we can to respond to this worldwide health crisis in order to prevent the spread of the COVID-19 pandemic and protect lives.

“Work is ongoing to address the short-term and long-term impacts that the pandemic will have on the council’s finances.

“We expect the Government to honour its commitment to ensure that all councils get the financial support they need in order to continue supporting communities, local economies, the care sector and health service and the council has identified reserves funding to underwrite this.”

Lancaster

Views of Lancaster Cathedral, Lancaster Town Hall and Lancaster Ashton Memorial rooftops. (Image: Colin Lane/Liverpool Echo)

Lancaster City Council has projected its worst case scenario being a £9.1 million overspend on budget, with a worry that ‘normal’ financial levels will not return for years.

Its best case is a funding deficit of £4.6 million.

And council bosses are adamant that if central government does not offer more help, cuts will be necessary, with all non-coronavirus spending now being reviewed.

Up to £6.9 million is expected to be lost in income, reduced by government funding of £1.54 million and internal savings of between £1.1 million and £1.3 million.

In notes to the city council’s cabinet ahead of its meeting on June 9, the council’s chief finance officer notes: “There is a likelihood that incomes may not recover and COVID-19 related expenditure may extend into future years.

“In the longer term, it is recommended that the council undertake an outcomes based budgeting exercise to refocus budgets around the Council’s COVID recovery priorities.”

Lancaster’s usable reserves at the end of March 2021 is set to be £13.6million, meaning it’s usable reserves after a worst case scenario would stand at just £4.3 million.

Councillor Dr Erica Lewis, Leader of Lancaster City Council, said: “At the beginning of the crisis, government ministers told us to do everything we needed to do to support our residents and that they would have our backs.

“The government continues to ask councils to do more and more, often at short notice and with no consultation on the practicality of the measures they are proposing, and then failing to fund us for that extra work.

“The expected shortfall in funding and losses in income means we are putting in place processes to review all non-COVID related spending.

“We urgently need funding certainty from the government. We also need central government to work with local government as partners.

“If the government continues to fail to provide funding certainty and to partner with us to recover and reset it is likely that the council will have to look to make savings.”

Preston

Preston town hall

The figures for Preston have not been made public, with council bosses telling LancsLive it is “too soon” to realise the full impact.

But the council did admit the £1.5 million of additional funding from central government is “unlikely” to cover all the extra costs and revenue losses brought on by the virus.

Neil Fairhurst, Deputy Chief Executive and Director of Customer Services at Preston City Council said: “The funding received from Government has financed the initial costs of COVID19, supporting our community hub, the extensive work carried out by our teams and partner agencies helping the homeless and other key services.

“However, for local government as a whole it’s unlikely that this funding will cover all additional costs and it is too soon to realistically estimate the full impact of COVID on the council finances for future years.”

Burnley

(Image: Colin Lane/Liverpool Echo)

Burnley Borough Council, like Preston, said it is unable to provide clarity on a shortfall in funding.

A spokesperson said this figure is subject to a briefing to council leadership.

But LancsLive can reveal there are no current plans for an emergency budget, with its unallocated reserves standing at just £1.4 million.

Its budget for 2020/21 is £15.6 million, boosted by £957,000 in central government coronavirus funding.

South Ribble

South Ribble Borough Council

South Ribble Borough Council is preparing for a loss of around £2 million in 2020/21.

This is despite additional government funding of £1.14 million.

But council leader Paul Foster told LancsLive he has “no regrets” due to the necessary actions taken to taken Covid-19, with the ‘community absolutely coming first, no matter what’.

Instead, the Labour-run authority is calling on central government to ‘do its bit’ and help local government as the crisis continues.

Councillor Foster said: “I am extremely proud of what we have been able to achieve in South Ribble despite such adversity.

“But ultimately, yes, there has been a significant cost to what we’ve been supplying, by way of groceries, community support, and council tax support – and we believe that, added with loss of income, this figure is about £2 million.

“I have absolutely no regrets, though, about the steps we have taken to tackle Covid-19 and the dreadful effects it has had on our way of life.

“However, I am nevertheless concerned that central Government need to do their bit and help us out with the financial impacts that we all now face as local authorities, which are being much talked about at present (and rightly so) – and which must, must be heard by the likes of Robert Jenrick, Rishi Sunak and Boris Johnson.”

Chorley

(Image: Colin Lane/Liverpool Echo)

Like its neighbours at South Ribble, Chorley Borough Council is facing a funding black hole of around £2 million.

And like South Ribble, criticism is being left at the doorstep of central government over a lack of “necessary clarity” as to its role in helping local government during the Covid-19 pandemic.

Council leader Alistair Bradley told LancsLive: “We are disinclined at this stage to draw up what would be quite a rough and imprecise calculation regarding the council’s financial future.

“Why? Because there are many gaps in our projected balance sheets, where we simply do not know the numbers in each column.

“We are yet to receive the necessary clarity from central Government over whether they will cover all our costs, as indicated at the start; or what the plan is for local authority funding next year.

“This is going to be difficult, but the work we’ve done over the last few years has put us in a good position to rise to this sort of challenge and continue to provide excellent services for residents and businesses.

“We are looking at all our major projects to see what we can, what we should, continue with, and we might well look at setting a new budget in the autumn when we have a better idea of how Covid-19 will have affected us.”

Coun Bradley added: “Whilst the economic losses have been significant, nothing can compare to the trauma, impact and grief of losing a loving one.

“So the council, whilst reflecting on the hard financial circumstances we are in, does not want to lose sight of the real losses in this borough, around Lancashire and the whole country and we are committed to remembering those who have died at the hands of this awful disease.”

Wyre

Wyre Council
Wyre Council

Wyre Borough Council, which includes Fleetwood and Garstang, is looking at a large drop in income of £8 million.

It’s costs are expected to increase by more than £1.1 million; the amount that it has received from central government in coronavirus funding relief.

In May, we reported that the council predicted a £5.5 million funding conundrum, showing the estimates have worsened in Wyre.

A council spokesperson said: “We estimate that our income in a full year could reduce by as much as £8m and our increased costs are forecast to exceed £1.1m.

“And so the conversation with central government must continue on how we work together to deal with the challenges faced by local government, whilst at the same time recognising the huge challenges faced by national Government too.”

Fylde, Ribble Valley, Hyndburn, Rossendale, West Lancashire, and Pendle councils did not respond before deadline.