Coronavirus: Town Hall needs tens of millions more in emergency funding, report reveals
Hackney Council has revealed the scale of the shortfall in government funding meant to help local authorities through the pandemic.
The Town Hall has received £10 million from Chancellor Rishi Sunak’s initial £1.6 billion, and expects around £7m from the further £1.6bn announced on 18 April.
The council also maintains £15m in unallocated reserves, but even before the pandemic was running a budget gap of £19m.
According to Town Hall finance boss Ian Williams, the overall financial pressure on the council will run to £36m for the first three months of the year, with the full year’s costs expected to run to a staggering £72m.
In a report explaining the financial cost of responding to the pandemic, Williams wrote: “On the issue of government funding, I do have some concerns about its adequacy.
“It is clear that if these estimated pressures are in the right ballpark then a
significant funding gap will start to emerge towards the end of the first three months and additional funding will be required from government in addition to the emergency fund and 18 April allocation, to plug this gap.
“The actual level of additional spending and income loss will of course depend primarily on the length of time emergency COVID-19 measures remain in place and the extent to which society recovers and gets back to normal in the coming months.”
Williams added that some residents and businesses will still be experiencing the impact of the pandemic in the long term, with the Town Hall preparing to support vulnerable residents over 70 or with pre-existing conditions, warning that some may be advised to self-isolate or social distance for up to two years.
The report hints at difficult decisions ahead for the Town Hall’s Labour administration, with no clarity as to whether the council will be able to meet its own service requirements through lack of funds.
Potential outcomes pointed to by Williams include the reviewing of the end of “non-essential work” by the Town Hall, as well as moves to reallocate resources to prioritise support measures during the crisis and ensure the council itself does not go out of business.
Options looked at in the report include delaying work on some “capital projects”, with no specific ones named. Capital investment involves fixed assets owned by the council, such as the recent £322m investment into projects such as the new learner pool at London Fields Lido or the refurbishments of Stoke Newington Library and Hackney Museum.
Service investments made as part of the most recent Town Hall budget could also be “paused or cancelled”. Again, no specific options are mentioned, but such investments can be defined as policies such as the one-off funding of £500k announced in last year’s budget to reduce poverty, inequality and build social cohesion.
The report goes on to warn that the government’s own costs in allocating the emergency funding will have to be repaid, warning of a further round of austerity in the public sector in years to come as “a real possibility”.
It is understood that the most significant costs projected by the council are expected to come from exceptional demand on adult social care services, with an “ongoing risk” that costs for these specific services will be higher than grant funding provided by the government.
The council also expects a loss of £7m for the year on its housing revenue account through loss of social rents, charges and commercial rent, with no financial support yet announced by government in this area.
According to the report, Hackney Mayor Philip Glanville and Deputy Mayor Rebecca Rennison’s initial work has resulted in the following allocation of funds from the emergency grant:
- £3.5m to adult social care
- £1m to children’s services
- £1m to education
- £2m to environmental and regulatory services
- £1m to housing, including homelessness
- £1m to finance & corporate resources
Williams added: “While there may be further government compensation, it is not clear under what terms compensation will be given and it would be prudent to assume that not all our costs will be covered.
“In addition, the government’s response to the Covid-19 crisis is developing with the potential for more funding announcements and support to local government to meet the financial implications of the crisis.”
The finance boss has made the assumption that Hackney’s portion of the second £1.6bn announced on 18 April will be less than the first round due to “widespread criticism from shire districts and some counties on the grounds that their allocations were grossly insufficient”.
Williams is now reviewing all previously earmarked reserves, as well as all planned investments made by the council, with a view to freeing up resources, as well as going through the costs of all “non-essential” services offered by the council against the possibility of the Town Hall entering a “period of financial ‘lockdown'”.
However, the finance mandarin has underlined that the borough’s own funds were under “significant stress” already, making it unlikely that there will be a large amount of money to be found in the council’s own purse.
The Town Hall is expecting a number of “exceptional” costs in dealing with the pandemic, including setting up and coordinating support hubs for vulnerable people, mortuaries and crematoriums, and supporting schools opening out of term, amongst many others.
Other costs stem from a wide range of fronts, including increased demand on social care, loss of council tax and business rates income, loss of rental and commercial income, with an associated risk that the Town Hall’s council tax scheme will cost in excess of the £4.6m allocated to support it by government.
The council’s home-building programme, which sees houses go for private sale to fund other, more affordable homes, is also coming under pressure, with sales and completion delays of its Nile Street and Tiger Way properties hitting cashflow and increasing void costs.
Complicating the picture further are two separate reviews of local government funding which Hackney Mayor Philip Glanville has warned could double the existing £19m budget gap to over £36m by itself, though Williams poured cold water on the idea that such shake-ups could occur during lockdown.
Mayor Glanville said that staff have been working hard to “fill gaps in government provision”, with the borough leader last week helping to deliver the roughly 1,500 weekly food parcels it will now be sending to residents trapped at home.
It has also rolled out £100m in support for the local economy, including a three-month rent holiday for voluntary and charity sector organisations, rent deferrals for commercial tenants, a suspension of commercial waste charges for closed businesses, and suspended fees and charges for street market traders unable to work.
A £100k hardship fund has also been created for migrants and refugees with no recourse to public funds, with £620k invested in discretionary grants for residents in emergency need or who cannot pay their rent.
Mayor Glanville said: “I know that the real impact of this crisis is on the families who have lost loved ones in awful circumstances over the past few weeks. Our thoughts are with them, and all of our residents who have contracted this virus or are helping to care for those who have.
“Although we can’t physically come together right now, I’m proud of how Hackney has responded as one community – whether the heroic NHS staff putting themselves at risk to help others, care homes staff and those that deliver social care in people’s homes, the frontline staff in the council and other organisations who are delivering crucial services for vulnerable residents, or the volunteers looking after their neighbours. This Hackney spirit is what will get us through this together.
“At the start of the pandemic councils like Hackney were told by the government to ‘spend whatever it takes’ to respond to the crisis. This report highlights the impact not keeping that promise would have, and the sheer financial cost of responding to the pandemic, alongside the tragedy of lives lost and families torn apart.
“While the government’s latest funding announcement at the weekend was welcome, ministers must renew that clear commitment that they made at the start and promise to back our staff delivering vital social care, waste and other services during this crisis – not just with platitudes, but with money.”
When asked by the Citizen if local authorities could expect any further funding and under what terms, a spokesperson for the Ministry of Housing, Communities and Local Government said: “The Secretary of State has announced a further £1.6 billion of funding for councils, taking total funding to support councils to respond to the pandemic to over £3.2 billion.
“This new funding will support them through immediate pressures faced by councils to respond to coronavirus and protect vital services.”