New
analysis by IFS researchers as part of a project funded by the
Local Government Association suggests that extra government
funding for the current financial year will largely be sufficient
to compensate for the overall impact of the COVID-19 crisis on
English councils’ spending and income. Shire districts are the
only type of council to face a shortfall on average, equivalent
to around 7% of their pre-crisis revenues.
Extra funding has also been provided for the coming
financial year and could be topped up from the government's
COVID-19 reserve if necessary. However, the picture for 2022–23
and beyond looks much more difficult. The government has not yet
allocated any funding to address longer-term impacts of the
COVID-19 crisis on the demand for and cost of public service
provision. Indeed, the spending envelopes set out in this months’
Budget imply spending 8% less, on average, on unprotected areas
such as grants to councils than was planned prior to the COVID-19
crisis.
This could be particularly challenging for poorer areas
which are likely to see both the biggest long-term harms from the
COVID-19 crisis and be less able to raise substantial sums
themselves via council tax, even if the requirement to hold a
referendum before implementing a big increase in bills is relaxed
or abolished.
David Phillips, Associate Director at the Institute for
Fiscal Studies and author of the observation, said:
“The latest figures suggest that the extra funding provided
to English councils in 2020–21 should largely address the
financial pressures they have faced so far as a result of the
COVID-19 crisis. Extra funding is also being provided for the
coming financial year – and could be topped up from the
government’s COVID-19 reserve if necessary.
Plans for 2022–23 and beyond won’t be confirmed until this
autumn’s Spending Review. But the spending envelope set out in
the Budget earlier this month implies around 8% less for
unprotected areas of spending – which includes central government
grants to local authorities – than was planned prior to the
COVID-19 crisis. This is despite the new demands and pressures
likely to be faced. Councils may therefore find themselves stuck
between a rock and a hard place: government funding that fails to
keep with demands and costs; but potentially continued
restrictions on what they can raise themselves via council
tax.”
You can read the full observation on our website
here:
https://www.ifs.org.uk/publications/15371
