Tower Hamlets council warns of 'perfect financial storm' brewing due to increased cost of COVID-19

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The London Borough of Tower Hamlets is facing a funding shortfall of £35.72 million for April, May and June 2020 - equivalent to an additional £108 per resident - due to the increased cost of responding to COVID-19 combined with a corresponding loss of income.

Just like businesses and households across the country, who may be worried about how they will now pay their bills, councils are not immune to the financial impact of COVID-19. Tower Hamlets is therefore calling on the government to deliver on its “whatever it takes” pledge to cover the cost of their response.

John Biggs, Mayor of Tower Hamlets, said: “As a local authority, we have responsibility for delivering on many areas of government policy. When responding to COVID-19 we have been asked to do more - which means we have had to spend more.

“Like other councils we have existing commitments combined with new regulations, increased support for residents and business, higher demand for some services and a loss of income in other areas. This has created a perfect financial storm for local authorities.

“The government has called on everyone to ‘play their part’ and committed to doing ‘whatever it takes’ to help people during this time. Now they must put their money where their mouth is.”

The funding shortfall is a combination of increased spending and loss of income - which has led to an estimated net additional spending of £55.12 million, with the government, so far, only committing to provide just £19.4 million from its COVID-19 support grant.

Councillor Candida Ronald, Cabinet Member for Resources said: “The funding shortfall due to COVID-19 shows yet again that local councils are an afterthought for government. Our budget was already under pressure from increasing demand on local services at the same time as annual funding cuts.

“COVID-19 has highlighted the importance of well-funded local services for our residents. Our community needs this money back to recover from the lockdown and to enable us to support them through the resulting economic fallout.’’

Additional spending has gone towards work such as adult social care, housing homeless people, providing food and protecting vulnerable residents, and sourcing personal protective equipment. Loss of income has come from significant reductions in revenue from businesses and council tax as well as in other areas where sales, fees and charges are collected by the council such as for planning fees, waste collection for businesses, and many more.

ENDS

Notes:

  • Research by the BBC shows nearly 150 local authorities have forecast a combined budget shortfall of at least £3.2 billion.
  • Per resident estimate of increased expenditure is based on the budget shortfall of £35.72 million divided by a projected population estimate for 2020 of 331,000 residents.
  • On 16 March 2020, Local Government Secretary Robert Jenrick met with over 300 council leaders and sector bodies to ‘reaffirm support for councils in their coronavirus response’ - here, he said: “Everyone needs to play their part to help the most vulnerable in society and support their local economy, and the government will do whatever is necessary to support these efforts.”
  • Also, writing in the Telegraph on 20 March 2020, Robert Jenrick said: “We have an enormous challenge ahead of us and but my message is clear – this Government will do whatever it takes to help people across this country at this difficult time.”
  • In Tower Hamlets - the estimated annual cost of meeting additional COVID-19 related expenditure and loss of income from all sources is £146.1 million.
  • Since 2010, the council has also had a £148 million cut to its core grant funding from central government.
  • The Local Government Association estimate that between 2010-2020 local authorities had a reduction in core funding of nearly £16 billion - a loss of 60 pence in every £1 of funding to spend on local services.
Posted on Tuesday 30th June 2020