Councils face post-Covid cuts of £2bn, report says

“Perfect storm” of financial pressures could stay with councils for years to come, according to the Institute for Fiscal Studies. 

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Local councils in England will have to find £2bn to cover both the response to the coronavirus pandemic and the loss of income from lockdown, according to a report from the Institute of Fiscal Studies (IFS)

Councils have had to develop and deploy new services due to Covid-19, such as housing rough sleepers, supporting vulnerable people in their homes, and operating local test and trace systems. Central government has already granted councils £5.2bn in support, but this will fall short of the combined impact of £4.4bn spent on pandemic response and £2.8bn in lost income, the think tank says. 

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The IFS estimates that even if councils use up their reserves, around four in ten would still be facing holes in their budget, an issue that will likely be compounded by the loss of business rate and council tax revenues next year. Shire district councils, that get more of their income from “sales, fees and commercial” sources, are expected to be hit particularly badly.

The report calls for councils to be granted further support for government and allowed to borrow money to ensure essential services can continue to run and spread the cost over several years. 

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Samir Jeraj is a Special Projects Writer at the New Statesman

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