Decline in Covid costs for Lancashire County Council - but unseen impact may be on the way

The estimated coronavirus bill faced by Lancashire County Council has fallen by £16m – but the authority’s leader is warning that the figure does not tell the full story of the financial impact of the pandemic.

Monday, 8th June 2020, 6:25 pm
Updated Monday, 8th June 2020, 8:48 pm

Each month, councils submit a forecast to the government setting out the additional expense which they expect to incur as a result of the outbreak.

Between April and May, County Hall’s costs estimate dropped from £120m to £104m for the current financial year. So far, the authority has received £56m in additional government funding to help cover the impact of coronavirus on its books.

Council leader Geoff Driver has previously called for the government to foot the bill in full and, as the latest estimate emerged, he said that the apparent reduction is at least in part due to the way the figures are being calculated.

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County councils like Lancashire have been told to estimate the effect of Covid on their finances without considering any potential reduction in their shares of council tax and business rates

County councils have been told not to include any estimated loss of income from their shares of council tax and business rates – because these are being reported by the district and city councils which collect the cash before it is redistributed.

The lion’s share of business rates are retained by the lower-tier authorities themselves, but the vast majority of council tax is transferred to County Hall for services such as adult social care.

“Something like 90 percent of [any such loss] will be stood by the county council – so it looks like we haven’t lost as much as we potentially have,” County Cllr Driver explained.

“The problem might not come for us this year, because by law, the districts have to pay over the precept [the county’s claim on the total council tax collected]. They might have to borrow for it or go into their reserves.

“But next year, there will be a big deficit on the collection [of council tax] and we’ll have to stand that.”

It is feared that council tax payments could be affected by any spike in unemployment as a result of the pandemic, with business rate levels potentially similarly affected by company failures.

County Cllr Driver said that about £11m of the £16m estimated reduction in County Hall’s costs is accounted for by the fact the authority now believes that it will be able to meet savings targets already planned for 2020/21, which it feared at the start of the crisis might become unachievable.

The Local Democracy Reporting Service understands that Lancashire County Council is not planning an emergency budget. The authority is next due to set out its financial plans in February 2021.

Communities and local government secretary Robert Jenrick said on Twitter last month that local authority expenditure so far as a result of the pandemic had been more than covered by the support provided by Whitehall to date.

“At the start of the pandemic, we said that we’d make sure that councils had the support they need to respond to coronavirus.

“The returns from councils indicate an expenditure of £1.25bn from March-May, against a grant of £3.2 billion from central government and £600m [in infection control funding] for care homes,” Mr. Jenrick tweeted.

However, the expenditure figures do not cover council income lost because of the Covid crisis – which the 36 members of the County Councils Network last month said could total £2.4bn in terms of council tax and business rates alone.

The organisation forecast that counties will miss out on another £430m in terms of fees and charges this year.