Councils face a £ 0.5bn tax deficit
The councils are facing an estimated deficit of £ 509million in their municipal tax collection funds for last year, which they had until 2023-24 to pay.
The data comes as the government is increasingly concerned that the government will end support for Covid at the end of next month with no plans in place after that to cover the industry’s current expenses related to Covid.
Billing authorities have indicated that they face an estimated net deficit of £ 509million in the share of their housing tax revenue chargeable in 2020-2021, excluding amounts relating to previous years. The figure rises to £ 546million when surpluses are not factored in, representing 1.65% of the total £ 33.1million house tax requirement for 2020-2021 .
The figures, released yesterday by the Department of Housing, Communities and Local Government, underline the pressures facing councils at a time when Covid-related spending continues to rise. The latest financial reports to MHCLG show additional spending due to Covid rose from £ 609.8million to £ 891.5million (46%) from February to March, with London boroughs registering the largest increase, from 94.5 to 160.8 million pounds (70%). ).
Meanwhile, revenue losses fell from £ 427.4million to £ 456.2million, for a total of £ 5.6 billion for the year.
The government has not announced any further support for Covid next month, leaving the boards facing an uncertain financial future with the threat of new Covid outbreaks looming.
To help councils manage their housing tax deficits, the government changed the rules in December to allow last year’s deficit to be spread over 2021-22, 2022-23 and 2023-24.
The figures do not take into account actual board surpluses / deficits, nor the 75% tax revenue guarantee scheme described by the government in November. This will offset the boards for “a large part of these losses,” according to Rob Whiteman, managing director of the Chartered Institute of Public Finance and Accountancy.
“At the end of the day, this financial hole is not as deep as it looks,” he said. “But with the government ending support for Covid at the end of June, it’s hard to see how the councils can afford to pay off the remaining deficit without additional help from taxpayers going forward.”
The authority with the highest tax deficit was the Liverpool City Council – which reported an estimated deficit of £ 17.7million, followed by Leeds City Council (£ 15.9million), Brent LBC (£ 15.1million) and Bournemouth, Christchurch & Poole Council (£ 9.7m)
On the other end of the spectrum, some authorities have reported estimated surpluses – for South Oxfordshire DC of £ 4.2million, Greenwich LBC £ 4.1million and Barking and Dagenham LBC £ 3.7million .
A financial source expressed skepticism about the likelihood that boards will be able to balance their deficits, despite the longer time frame, saying: “It is impossible to see at the moment how much of this money will have to be written off – a lot depends. of how quickly the economy is rebounding. “
They said that while the £ 509million deficit might appear to be a significant amount, ‘some people at one point thought it would be more than that’.