Local councils face £605m black hole

Local councils face £605m black hole

Many UK local authorities face significant funding gaps and the financial outlook for the sector is concerning, according to a report from the National Audit Office (NAO).

Its study revealed that 25 councils are at serious risk of going bust, and a further 337 are at a ‘high’ or ‘acute’ risk of financial failure.

The NAO said that while effective action from government has assisted local councils in surviving financially during the Covid-19 pandemic, they have forecast that it has created £6.9 billion of extra costs in 2020-21 because of the need to deliver new services and the increased cost of delivering some existing services. There have also been fewer opportunities to deliver savings programmes.

The pandemic has also caused a forecast loss of £2.8 billion of income for local authorities in 2020-21, as a result of a reduction in their sales, fees and charges, commercial and other income streams. Authorities expect to lose £695 million from reduced car parking income, and £554 million income from facilities such as leisure centres, theatres and museums that they run. Further losses of £1.3 billion in council tax and £1.6 billion in business rates are expected but will not affect budgets until 2021-2022.

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