Coronavirus: City council facing £7m financial shortfall

As a result of the mounting costs of paying for the COVID-19 crisis, Peterborough City Council is facing the shortfall in its funding, even after help from the government.

It’s estimated that the crisis will cost £18.4m which exceeds the £10.998m granted to Peterborough City Council by the government - £5.364m on March 27 and an additional £5.634m on April 18 - leaving a gap of £7.402m.

The council is likely to dip into its reserves while it seeks additional government support.
Peterborough City Council reserves currently stand at £13.9m. If the shortfall is taken from there, it will leave just £6.498m in reserve.
Cllr David Seaton, Cabinet Member for Finance, told this week’s Cabinet meeting: “Clearly we will continue to serve and support the community to protect vulnerable people and provide critical government services through this crisis.

“But the report focuses on the financial pressure the council is under, linked to delivering these key ongoing services.

“While secondary to saving lives, our current financial issues are important as we have a significant shortfall to address.

“In order to pay for the coronavirus emergency, we need the funds to do it and our current best estimate is that it will cost us £18.4m over the financial year to pay for everything being provided.

“As part of the emergency funding released by government in late-March, Peterborough was allocated an initial sum of £5.364m which was followed by an additional sum of £5.634m on 18 April. That gave us total funding from the government of £10.998m.

“However, as stated, the current emergency will cost £18.4m which means we either have to go back to the government and hope that they will provide us with the shortfall, or, we can use more than half of our current reserves to make up that shortfall.”

The report was split into four significant sections where funding has been allocated:

- An analysis of support that government has granted nationally and how this relates to Peterborough.

- The cost impact on the council.

- High level queues and their impact on tax collection.

- The ongoing impact on the revenue budget.

Cllr Seaton added: “The government have provided substantial support for Local Authorities amounting to some £2.6bn of direct government grant funding for the crisis and our share of that has been £10.998m.

“In addition, there has been £1.8bn of rates relief, for leisure, hospitality, retail and non-council run nurseries. For Peterborough, this amounted to an award of £37m.

“Plus, there was £3bn of grant support to rural and small businesses, leisure, hospitality, and retail. For Peterborough, the city council was awarded £34.5m.

“There was also a grant of £500m for council tax relief, which amounted to £1.6m for residents of Peterborough.

“We made available almost immediately grants of £10,000 and £25,000 and I’m able to announce that as of today we’ve made payments to 93.26% of the 2,600 local applicants.

“This means we’re the eleventh best council in the country at getting these grants out to local businesses and we were the only council in Cambridgeshire to achieve the government target of 90% pay-outs.

“Compare this for example to Luton Council, who were bottom of the league table having only paid out 54% of grants to those who applied and you can see that we should be very proud of the response this council has made in supporting local business.

“That said, the cost impacts of COVID-19 have been felt across all departments, where it falls into three broad categories.

“Firstly, we’ve spent £7m of direct COVID-19 costs such as the 10% uplift costs to care providers, moving temporary accommodation clients into hotels and the setting up of the temporary morgue.

“Second, we’ve lost £6.8m of commercial income as a result of COVID-19; things like parking and planning application income could be reduced by up to 40% this year.

“And finally, we have a number of savings items that we expected to deliver during the coming year that will now be very hard to achieve, given the reallocation of staff and resources to fight COVID-19. That amounts to a cost loss of £4.5m.

“Those figures are being continually reviewed on a monthly basis because the council gives a return to the Ministry on the estimated financial impact, with the next report due this Friday (15 May).

“Normally in a given financial year the council would expect to collect £91m of council tax and £67m of business rates; but we know there will be significant delays in the collection of these taxes over the coming months for various reasons – all of which affects the council and its finances. At present our best estimate is that it could result in a £15.8m impact.

“The ongoing impact on the revenue budget then is that we have an estimated £18.4m worth of pressures, but only £10.998m of government funding.

“So, we will need to draw £7.402m from reserves.

“Given that the council needs to provide vital services and re-build our budget in 2021/22, the £6.498m left in reserves means that we will have to go back to the government at some stage for additional funding help to get a balanced budget position.

“We’d already started detailed financial planning for that year before the COVID-19 emergency began, but of course now all our assumptions and associated impacts will have to be reviewed.

“What I would say is that Peterborough is no different to any other council up and down the country at the moment – we’re all in the same boat in this regard.”