Barnet Post

Pandemic sees Barnet's council tax income drop by more than £5m

Trade body warns that local authorities could struggle to repay deficit

Hero for Pandemic sees Barnet's council tax income drop by more than £5m
Source: PA
By Joanna Morris, Data Reporter   

A dramatic drop in council tax income during the coronavirus pandemic has left authorities in Barnet facing a funding shortfall of more than £5m new figures reveal.

Councils across England are facing a combined deficit of more than half a billion pounds for the 2020-21 financial year, after council tax intake plummeted in the majority of areas. Data from the Ministry of Housing, Local Government and Communities show Barnet council will have to address an estimated shortfall of £5,736,168.

A government scheme should help to plug the funding gap, while the deficit will be spread over three years and split between the Greater London Authority, and the council as billing authority.

A spokesperson for Barnet Council said:

“Our collection fund deficit is the result of reduced collection in business rates and council tax, as well as an increased number of residents moving to our council tax support scheme. We will be mitigating the impact of the deficit through the Tax Income Guarantee scheme and grant funding already made available by the government. The deficit is, therefore, not expected to affect council services this financial year. We will manage our mid-term budget to ensure there will be no long-term impact on our frontline services.”

But the “financial hole” caused by a drastic fall in anticipated income to the authority’s collection fund could cause resource and budget pressures for years to come.

The Chartered Institute of Public Finance and Accountancy, a trade body, has warned that the end of government-funded Covid support could make it even more difficult for councils to repay the deficit. The collection fund represents income and expenditure relating to council tax and business rates, with estimates used to help set local authority budgets.

In response to the pandemic, the government asked councils to estimate the impact of Covid-19 on the collection of funds for 2020-21. Just 41 local authorities expect a surplus in council tax income while more than 250 reported estimated deficits of between £14,000 and £17 million.

There were ten councils that indicated they were not in deficit but did not report surplus figures. The national anticipated deficit across all councils in England rises to £546 million when surpluses are not taken into account, the data shows. But the figures do not reflect councils' overall financial position after other funding and spending is accounted for, nor the impact of the tax income guarantee scheme announced by the government in November. Under this scheme, local authorities will be reimbursed for up to 75% of irrecoverable council tax and business rate losses, with payments expected to begin in the near future.

Rob Whiteman of the CIPFA said this will compensate councils for a “large chunk” of the deficit.

He added: “Ultimately, this financial hole isn’t as deep as it looks. But with the government ending Covid support by the end of the year, it’s hard to see how councils will be able to afford to repay the remaining deficit without additional ‘help’ from taxpayers in the future.”

Separate MHCLG figures show that, across England, council overspend due to the pandemic totalled around £6.9 billion in March, while losses were calculated at around £5.1 billion.

An MHCLG spokesperson said: “We’ve committed over £36 billion to help councils support their communities and local businesses during the pandemic.

“We’re also providing councils with £670 million of new grant funding to enable them to continue reducing council tax bills for those least able to pay, including households financially hard-hit by the pandemic.”

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