Council spells out the extent of coronavirus budget impact

Council spells out the extent of coronavirus budget impact

Manchester City Council will set an ’emergency’ budget next month detailing how it intends to deal with the huge impact of the Covid-19 pandemic on its finances this year.

The Council approved its annual budget for 2020/21 at the beginning of March but since then it has taken a severe hit.

The combined financial impact of increased costs and reduced income associated with the coronavirus crisis is estimated at £167m for 2020/21 alone. Some £136m of this relates to lost income from sources such as the Council’s part ownership of the airport, business rates and council tax receipts and fees and charges for services and car parks.

Extra Government funding amounting to £33.7m has been provided but this still leaves the Council facing an anticipated £133m shortfall based on the immediate costs and loss of income up to March next year.  Whilst a big part will fall into this year’s budget, the majority will impact next year and is likely to increase further as the longer term effect on the economy and residents becomes clearer, leaving a gap currently estimated at around £160m in 2021/22.

Nationally, the Local Government Association has estimated that local authorities are facing a shortfall of £6 billion in the next few months with some councils even warning of bankruptcy. 

Proposals to reset the Council’s budget, setting out measures to deal with the impact of the shortfall in this financial year, will be considered by the Council’s Executive on Friday 29 July. 

But as the majority of the financial impacts will not be fully felt until 2021/22 – and the duration of ongoing impact of Covid-19 is still unclear – it is likely that more difficult choices lie ahead.  This is especially challenging when these are on top of a decade of austerity.

Councillor Carl Ollerhead, Executive Member for Finance, said: “Let’s not dress this up – the picture is bleak. 

“From day one of the Covid-19 crisis, this council has stood up and taken a lead role not just in supporting public health messages but also ensuring support was available for those most impacted by the situation. Whether it was delivering PPE or food parcels, administering financial support for struggling people or businesses or providing accommodation for people who had been sleeping rough we have played – and continue to play – our full part.

“This will involve longer term financial pressures as a legacy of Covid-19, both those associated with care costs and the need to support the city’s economic recovery.

“But now the government must honour their commitment to councils that they would be given what it took to get through this crisis. While we have had some extra funding, it is nowhere near enough. 

“Unless that commitment is honoured, we will soon find ourselves facing some very difficult choices.”

Current financial estimates are based on assumptions around the easing of lockdown and the longer term impact of social distancing and living with Covid-19. Any further actions taken to address the pandemic, either nationally or local, will also impact on these indicative figures.

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