Herts County Council faces £22m black hole in budget after COVID-19

The authority warns that cuts would be needed, meaning it must “find ways to deliver the same services with less resource”.

“The impact of the pandemic is likely to worsen the financial position as we are seeing an increase in demand and complexity of need across a number of service areas,” said Steven Pilsworth, assistant director for finance.

“This will mean an increase in the level of savings needed by 2023/4.”

Mr Pilsworth said the authority was “forecasting a balanced financial position for the current year”, but that a shortfall of £22m was predicted by 2023/4.

“We expect the cost of, and demand for, council services will outstrip the expected increase in funding,” he said.

But, he added, “The council is in a strong financial position and has an impressive track record of delivering savings when necessary.”

COVID-19

County councillor Sharon Taylor described the government’s emergency COVID-19 funding for local authorities as “a sticking plaster on a severed artery”.

Cllr Taylor – also the leader of Stevenage Council – said: “Local government was in a funding crisis before we even got to COVID.

“What we’ve been given deals with pressures arising from COVID but doesn’t address the underlying issues of funding in local government... There was a £6.4bn gap in funding before we even got started on COVID.”

Cllr Taylor said borough councils were facing similar pressures.

She said that while the government had covered costs of specific problems during the pandemic, like housing the homeless and implementing test and trace programmes, other losses were not reimbursed.

Arianna Giovannini, deputy director of the Local Governance Research Centre, agreed.

“Councils have also lost other sources of income such as council tax and other locally sourced forms of income,” she said.

“There are a range of activities that go off-radar, which have not been available during the pandemic and the government appears to be blind towards.

“While support has been given, it comes on top of 10 years of austerity and it has not been enough to make councils sustainable in both the short and long term.”

She said some UK councils were “at risk of going bankrupt” and others were “struggling to continue to deliver just the statutory services.”

County councillor Sharon Taylor likened Government's COVID-19 funding to 'a sticking plaster on a severed artery'. (Image: Stevenage Council)

Commercial Investments

As government slashed funding for local authorities under austerity, councils were encouraged to invest in commercial properties, to generate income through rents.

It was the only alternative councils had to make up for the money that was no longer coming from central government,” said Ms Giovannini.

In Stevenage, the council no longer receives any government grant at all.

But, said Cllr Taylor, government’s COVID funding “doesn’t cover losses in that part of our income”.

Lockdowns saw businesses closed down for long periods of time. Some went bust and other realised they could work effectively with less or no office space.

“We were all encouraged to invest in commercial property in order to meet the gap in local government funding,” said Cllr Taylor.

“The government seems to have a very ambiguous attitude towards that now and is saying that those investments were down to us and if we’ve lost income they are not going to make up for those losses.”

Cllr Taylor said Stevenage, as a new town, had not invested in commercial properties but had inherited them.

“Some of us have legacy property,” she explained.

“With my council, the commercial property we have was handed over to the people of our town when the development corporation was wound up.

“We had losses in rental income from that property and that’s not been met by the government.”

The Government

The Ministry of Housing, Communities and Local Government said government had allocated more than £12billion to councils during the pandemic, half of which was not ring-fenced and could be used at councils’ discretion.

“In the coming months we will take stock of the demands faced by councils and the resources available to meet them and will decide on the timetable for future funding reform,” a spokesperson said.