Coronavirus: Impact of Covid-19 revealed as Havering Council forecasts £38m budget deficit
PUBLISHED: 17:01 17 June 2020 | UPDATED: 17:01 17 June 2020
Havering Council has predicted it faces a budget deficit of more than £38million in this financial year following the impact of Covid-19.
The figure was revealed in projections published in a report ahead of an overview and scrutiny board meeting this week.
The financial monitoring report focuses on the impact of the coronavirus pandemic on Havering.
A projection for the whole of 2020/21 outlines a net funding gap of £38.3m in the council’s budget - factoring in a total of £13.4m given by the government in April and May.
To put the figure in context, the council’s final budget for 2019/20 was £161.1m.
The council forecasts spending at least £14m on supporting the community through the pandemic, with £8.8m already spent across April and May.
Predicted losses from uncollected council tax and business rates for the year could reach £13.3m in a “worst case” scenario and the report says this shortfall will need to be built into the council tax setting process for 2021/22.
The council did not confirm when asked whether residents would bear the brunt of this gap in council tax increases but council leader Damian White said: “Council tax revenue accounts for 25 per cent of the cost of the vital statutory and discretionary services Havering Council provides.
“We are only three months in to the financial year and with the steps the borough and its economy is taking to return to normal we do not expect the worst case scenarios outlined in the paper to be realised.
“We are working with local government colleagues on setting out the case as a sector that the national economic recovery after Covid-19 must not place unfair burdens on local taxpayers or local services. This is a national crisis and it needs national solutions.”
Income from other fees and charges like parking, catering and leisure facilities, is forecast to drop £15m in 2020/21 and there is around £9.4m in planned savings that have been delayed.
The report says the council’s earmarked reserves and general balances, totalling around £61m, will only be used as a “last resort” to cover an overspend in 2020/21.
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Cllr White said Havering is in a better position than many councils despite the scale of the predicted overall £38.3m deficit.
He added: “The report highlights a projection but Havering is recognised independently as one of the most efficient councils in the country.
“Last year and this year, we increased our ‘rainy day’ funding to plan for different eventualities. We have sufficient reserves to cover worse case scenarios.
“Events like Covid-19 are why councils have reserves which are there to pay for crisis. We expect our financial position to improve significantly as recovery begins throughout the borough and are focused on continuing the vital frontline services on which residents rely.
“We are in constant dialogue with government both as a council and with local government across the country to ensure that decisions on allocation of central funding are fair and address local needs.”
When asked by the Recorder if the deficit would result in services needing to be cut, he said: “We are determined that there will be no reduction in our frontline services as a result of Covid-19.
“We will also explore and exploit the learning from our response to the pandemic about where services can be made both more efficient and effective.”
The council has identified some mitigating income to help reduce its costs, including funding relating to PPE provision, an underspend in capital charges and revenue contingency.
The report says nothing has been built into the projections relating to a potential second or third spike in Covid-19 infections.
It states: “It is essential for the health and wellbeing of residents, the survival of businesses and the financial health of the council that everything possible is done to avoid further outbreaks of Covid-19 in the borough.”
Cllr White added: “The work we have done since March has made us more than adequately prepared for a second spike but it is extremely difficult to predict how severe this would be or indeed the potential financial implications.
“Any costs would depend on the nature of the infection spread and the areas it would affect but further government financial support in such circumstances would be essential.”
The report will also be presented to Cabinet members at a meeting next week.
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