Local authorities across the UK are just weeks away from bankruptcy and while Covid-19 is the immediate cause, the roots of this crisis are much deeper.
Over the last decade, councils have suffered cuts deeper than any other part of the public sector. At peak, Crawley Borough Council had a budget of £27m, by the time I became council leader that had been cut to just £14m and it has taken huge efforts over the last six years to avoid that figure dropping any lower.
At the same time, the sources of council income have changed massively. Grant funding from central government is essentially gone, leaving councils reliant upon council tax–Crawley keeps 11% of what you pay, retained business rates–Crawley keeps 4% of what businesses pay, a bonus for whatever new housing we build, and whatever we can raise ourselves through investments and services which generate a revenue, like leisure facilities.
So, we have a situation where council revenue have been cut back to the bare minimum for sustaining services and where sources of revenue are now incredibly vulnerable to economic shocks. The lockdown has hit every part of councils’ incomes with more people eligible for council tax benefit, more businesses qualifying for rent relief, house building winding down, and the only services which make any money having to close their doors.
Dealing with Covid-19 has also increased council costs: providing temporary housing for anyone homeless, dealing with record levels of domestic waste, and setting up a food and medicine distribution service for those medically required to self-isolate are just a the most visible areas generating greater costs.
So far Crawley has a £2m funding gap out of a £14m budget, something which will grow the longer the lockdown is in place, yet we have received just £64,000 in Government support. £1.6bn really doesn’t go far when divided between 343 councils, particularly when county councils are taking the majority. Years of careful management of public money means that Crawley is better placed than most to weather this, but without an extra £10bn many councils will be bankrupt before this year is through.