Cheshire East Council is facing a massive £41 million budget shortfall this year because of the COVID-19 pandemic, according to new statistics revealed today.
And it could be one of many authorities considering a S114 notice – which effectively declares those authorities bankrupt.
A BBC Shared Data Unit investigation shows that CEC has so far received £19.69 million in Government funding – but predicts a worst case scenario of a £41 million shortfall.
That equates to £107 per resident, with a population of 384,152.
Nearly nine out of ten local authorities face budget deficits as a result of the coronavirus, with the estimated shortfall forecasted to be as high as £3.7 billion.
Councils like Cheshire East face increased costs from supporting vulnerable people, while their income from fees and rates is falling.
Two government grants to councils in England worth a combined £3.2bn have already been announced, but leaders say this no where near enough.
At least five local councils say it is possible they will have to issue an S114 notice if further government support is not forthcoming, effectively declaring themselves bankrupt.
Cheshire East, which has a net revenue spend of around £511 million, declined to answer when asked if they may have to file a S114 notice.
The council told the investigation it was not planning an emergency budget/in-year budget, but declined to answer if it will have to use emergency financial reserves or face a review of its revenue/capital programmes.
The predicted shortfall has increased fears that the authority will once again have to hike up Council Tax precepts for 2021-22 and beyond.
216 local authorities were questioned in the BBC Data Unit investigation, with 173 responding.
Councillor Amanda Stott, Cheshire East Council cabinet member with responsibility for finance, said: “All councils are feeling the additional financial pressure of responding to the Covid-19 pandemic – and Cheshire East is no exception.
“The council faces additional cost pressures of £60m due to Covid-19 this year alone. We welcome the additional funding from government provided to date – but it’s estimated we need up to four times this amount to meet the full costs to the authority.
“The pressures locally come from additional costs including social care, mental health, personal protection equipment, transport, distribution of business grants and ICT.
“In addition, it is costing us more to maintain essential services, such as waste and recycling collections, while ensuring that social distancing is in place.
“We are also experiencing losses of income, such as from catering, weddings and tourism, including visitors to Tatton Park.
“In February, Cheshire East approved a balanced budget for 2020/21 and we had plans in place to deliver this. However, Covid-19 has had a significant impact on every area of the council and it has changed things for all the residents, businesses and communities we serve.
“We do not yet know the lasting impact of the pandemic – but we do know that, even with anticipated government funding, we will experience unprecedented financial pressure this financial year and for years to come.
“In line with other councils, Cheshire East has lobbied the government to cover the full costsof Covid to local authorities, as originally promised. This work continues, supported by our colleagues in the Local Government Association and County Council’s Network.
“We understand that the government will clarify the position on funding for councils soon and we will consider our next steps then, in order to be able to plan our financial future.”
In neighbouring Cheshire West and Chester, the picture is less gloomy with a shortfall predicted at around £11.5 million – or around £34 per resident.
The authority was also more open in how it planned to tackle the shortfall.
In a statement, it said: “If there is no further funding from Government, the council proposes to make up the shortfall in 2020-21 in a number of ways, subject to Cabinet approval.
“These include funding from a reserve set aside at the end of the previous financial year, reallocating spending plans for this financial year (including savings as a result of current vacancies and reduced operating costs as a result of facilities being closed) and using money from the general reserves.”
The North West is the worst hit region, with both Manchester and Liverpool City Councils among the top 10 predicting the highest budget shortfalls.
According to experts a section 114 notice stops a council from making any new spending commitments, but still honours its existing ones.
Services the council has to provide by law, such as adult social care for upper tier authorities, will still be provided, but cannot be expanded.
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.”
Could anyone give me good reasons why Cheshire West faces a much smalle rshortfall than East Cheshire.
One of the reasons may be that Cheshire West have had a number of restructures/ round of redundancies over the last 10 years – reducing the non-statutory services. They have lost 60% of staff over 10 years. Cheshire East have not had such deep cuts – thus their operating costs, and potential shortfall will be much higher.