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19 June 2020

Leeds City Council faces £200m black hole

A long line of local authorities warn that without a bailout, banktuptcy is imminent.

By Jonny Ball

The Labour-run Leeds City Council faces a £200m funding shortfall that leaves it at risk of issuing a so-called s114 notice, effectively declaring bankruptcy, the authority has said.

Coronavirus-related overspending at the council stands at £197.6m, while there have been £60.9m worth of losses from reduced council tax and business rates income. The council is one of the 22 Yorkshire and Humber local authorities, that last month considered making a joint declaration to tell central government that they had run out of cash due to pandemic-related financial constraints.

At the beginning of the pandemic, the government was fast to provide £3.2bn in relief to councils facing a combination of increased costs and reduced revenue up and down the country. However, Labour estimated that councils are facing a £10bn Covid-19 black hole. James Jamieson, the Conservative chair of the Local Government Association, estimated that councils will face a total bill of £13bn for tackling coronavirus in 2020.

Of the £3.2bn of emergency relief the government has provided, £42m went to Leeds council less than a quarter of its projected shortfall.

At Wednesday’s PMQs, Labour leader Keir Starmer told Boris Johnson that councils across the UK were facing the choice between “cutting core services or facing bankruptcy.” As well as shrinking tax receipts, local authorities have been at the forefront of efforts to provide frontline services and care to the most vulnerable. Adult social care costs have gone up and many local councils are organising volunteers and food deliveries for vulnerable groups and those who are shielding. Many local authorities have set up hotlines for residents in need and several have spent significant amounts of money on personal protective equipment for staff when supplies from central government have not been forthcoming.

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In May, Leeds City Council Chief Executive Tom Riordan told the Local Government Chronicle that councils need “radical” government support on the scale of the £13.4bn NHS debt write-off earlier this year.

On Monday, Communities Secretary Robert Jenrick, under fire for his role in the approval of a £1bn property scheme by Conservative donor Richard Desmond, promised a “comprehensive plan” for financial sustainability. Mooted additional funding could include Whitehall-guaranteed council tax and business rates income to put local authorities on a steady financial footing. 

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