Councils’ finance black hole could cut heart out of town centres, say Labour

A £10 billion Covid-19 shortfall in council finances could threaten the full reopening of our town centres, leading to already struggling high streets closing for good, with libraries and leisure centres never reopening after the end of the pandemic, according to new research by Labour.

Councils in England spent over £800 million last year to support economic development in their town centres, including measures to help small businesses to grow, as well as hundreds of millions in capital funding.

However, as an unprotected service (unlike children’s and adult social care), councils would be forced to cut all of this spending to meet the shortfall from fighting Covid-19 if the Government continues to back-track on its pledge to support councils in the wake of the Coronavirus crisis, doing damage to Boris Johnson’s pledge to level up “left-behind” areas of the country.

A number of councils have already signalled that they may have to issue s.114 notices, effectively declaring bankruptcy – this would trigger immediate in-year spending cuts in order to comply with legal duties to run balanced budgets.

The cross-party Local Government Association has estimated that the financial pressure of meeting the costs of fighting Covid-19, including lost income from council tax and other revenues, totals between £10 and £13 billion. So far, the Ministry of Housing, Communities and Local Government has allocated just £3.7 billion.

Swim England fears as many as 10% of England’s 5,000 pools will never reopen and Leeds Council has stated that every library, museum, and gallery could be closed as a result of the hole in their finances as a result of Covid-19.

Steve Reed MP, Labour's Shadow Secretary of State for Communities and Local Government, said:

“Local authorities provide crucial support to many of the small businesses that have kept the country going during the pandemic, and that will be critical to our economic recovery, which is why Labour supported the Government’s efforts to do whatever it takes to get them through the crisis. 

“But Ministers are threatening to go back on their word, leaving councils on the brink of bankruptcy – and that could spell the end for both small businesses and the high street, which has taken a battering from the economic effects of Covid-19. 

“The Government’s new planning proposals show its lack of commitment to small businesses: instead of supporting our high streets, Ministers intend to allow their developer friends to gut shop fronts for use as poor quality housing.

“This Government will not deliver on its promise to level up communities across the country without giving councils the backing they need to help small businesses thrive Ministers must stand by their pledge and give our high streets the best possible chance of recovery."

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Cllr Nick Forbes, leader of Newcastle Council said:

“Key facilities like leisure centres, museums, and libraries drive footfall into town centres which benefits high street shops and small businesses.

“The crisis in council funding means many of these services may never re-open, which will not only see key workers lose their jobs but will also stop local economic recovery in its tracks.

“If the government doesn’t honour its pledge to fund councils to do ‘whatever it takes’ they’ll harm public services and the economic recovery.”

Cllr Richard Watts, leader of Islington Council said:

“High street businesses are the heart of communities, and government should be doing everything they can to get them back on their feet.

“But town centres will be crippled if the government hands developers the power to evict local businesses to make way for poor quality flat conversions.

“Introducing this policy as we enter a deep recession is an act of economic criminal damage.”