Is your council at risk of bankruptcy due to Covid-19?

Thursday, June 25th, 2020 12:21pm

By Local Democracy Service and BBC Data Unit

The impact of the COVID-19 pandemic and the consequent national lockdown have everyone hit hard - but they've hit local council budgets in particular.

Just this week it emerged Manchester City Council may have to declare bankruptcy in the autumn, if it doesn’t get any further funding to respond to the current crisis from central Government.

And the financial picture is bleak across the board in Greater Manchester.

Tameside and Trafford are two of several councils across the UK who say they will effectively have to declare themselves bankrupt unless the government provides more coronavirus support – although other councils in the region have bigger estmated shortfalls.

An investigation by the BBC Shared Data Unit and the Local Democracy Reporting Service has revealed that the local authorities face a huge budget deficit as a result of the coronavirus.

The estimated shortfall is forecasted to be as high as £25m in Trafford and £28m in Tameside.

Councils have seen increased costs from supporting vulnerable people, while their income from fees and rates is falling.

The government has already given £12.7m in funding to Trafford council and £13.9m to Tameside council to help cover their costs.

However, it appears this is far short of what will be required.

In response to this investigation, both councils said they may have to issue an S114 notice if further government support is not forthcoming, effectively declaring themselves bankrupt.

Both councils have said they are reviewing whether to hold an emergency budget meeting.

At the start of lockdown, Trafford Council had to borrow a total of £7m over a two week period to “ease cash flow issues”.

A total of £150m has been wiped from Trafford Council’s budget since 2010, but the authority’s investment strategy saw it borrow up to £194 million from government loan schemes in the last three years.

In 2019 alone, the council spent £153m on property purchases and investments to try to generate income.

They were the only councils in Greater Manchester to suggest to the BBC that issuing an S114 notice would be a possibility, despite most other councils also facing significant budget deficits – although Manchester has since said they may have to go down this route later this year.

Manchester council say they could face a shortfall as high as £133m, Salford £42m, Wigan £40m, Stockport £31m, Rochdale £28m, Bury £21m and Oldham £19m.

Bolton Council did not respond to their request, the BBC says.

When looked at in relation to their populations, Manchester also faces the biggest shortfall of £214 per head, compared to £162 per person in Salford, £126 per person in both Rochdale and Tameside, £!22 per head in Wigan, and £110 per head in Bury.

It falls to £106 per person in Stockport, £105 per person in Trafford, and £81 per person in Oldham.

England’s Minister for Local Government Simon Clarke MP said: “We’re giving councils an unprecedented package of support, including £3.2 billion non-ringfenced emergency funding, to tackle the pressures they have told us they’re facing.

“This is part of a wider package of support from across government for local communities and businesses – totalling over £27 billion – including grants, business rate relief and for local transport.

“We are working on a comprehensive plan to ensure councils’ financial sustainability over the financial year ahead – we will continue to work closely with them to ensure they are managing their costs and we have a collective understanding of the costs they are facing.”

More from Daily Coronavirus Updates

Weather

  • Tue

    15°C

  • Wed

    13°C

  • Thu

    17°C

  • Fri

    20°C

  • Sat

    15°C