Cllr Maria Kay is the Cabinet Member for Finance and Performance, and a councillor in Brixton Hill ward.
I am sure it will come as no surprise that since the end of March, when lockdown measures began, there has been significant financial impact on the council as a direct result of the pandemic. This period has resulted in the need for essential additional expenditure on support for vulnerable people alongside a significant loss of income.
In that time we’ve spent millions on supporting care homes, providing PPE, keeping businesses going, making emergency transport changes to aid social distancing and delivering over 20,000 food packages to vulnerable people. Essential as this work has been there is no getting away from that fact that extra spending, combined with a huge fall in income from parking, business rates and council tax, means we face a huge budget shortfall.
The government at the start of the pandemic said that councils would be fully funded and that we should spend whatever it takes. But so far, government funding covers less than half of the financial impact (£23m of a £47m budget shortfall). The Tories talk much of “levelling up”; when it comes to local government, it is a case of “levelling down”.
The additional £500m “comprehensive” funding for local government announced at the start of this month falls far short of the Tory government’s rhetoric – this amounted to an addition £3.5m for Lambeth. To illustrate the scale of the inadequacy of the funding, in London alone, London Councils estimates that councils will face a budget gap of £1.4b this financial year as a result of coronavirus related costs.
Even our most cautious estimates are that Lambeth could face a funding crisis of £27m – raising as high as £50m – as the country faces a recession and huge uncertainty. That’s more than we spend on rubbish collection, parks, libraries, leisure centres, roads, children’s centres and public health all together.
It would be a betrayal for the government to renege on their promise of financial support, forcing councils such as Lambeth to face the prospect of cuts to services after already suffering from a generation of Tory austerity. It is these very local services that have helped sustain Lambeth residents through the last three months and counting of this public health crisis, services delivered by the key workers on the frontline who have been rightly praised throughout the country since the outbreak.
Our prudent financial approach to building up our reserves towards CIPFA recommended levels means that we have sufficient reserves to cover the loss of £27m in year if required without the council having to take the decision to declare a section 114 notice. But make no mistake, local government is not scaremongering. There will be a number of councils facing the real prospect of having to go down this unenviable rote.
Due to our approach we will not be among them, but I can’t lie to you – we, alongside many other councils, are not out of the woods yet. The Greens called on the council to cut reserves to levels that would “not be considered prudent or provide sufficient financial resilience to the Council” and consistently called for reserves to be used, despite clear warnings that this would be financially unsustainable.
While no-one could have anticipated the events of the last few months, our policy of modestly increasing reserves to build them back up to prepare for Brexit, an uncertain economic outlook and government cuts, so that we’d be prepared for future uncertainties was exactly why we took those decision.
This is one of the most uncertain periods in peacetime to be making financial planning assumptions in local government. Local government was already facing a backlog of uncertainty before the Covid-19 pandemic struck: the expectation of the fair funding review; the revaluation of business rates and the retention of business rates; as well as the adult social care green paper and funding review. Although it has been momentarily eclipsed, Brexit also remains firmly on the horizon.
All of these issues and uncertainties have not gone away and have been delayed as a result of the Covid-19 pandemic. Central government has for a number of years been providing local government with a series of one-year grants, rather than sustainable longer term funding settlements, placing further uncertainty on councils when they consider their finances over the medium term. Meanwhile, demands and costs continue to rise in Adult Social Care, Children’s and Temporary Accommodation– a picture reflected locally, across London, and nationally.
Yet again local government is facing a period of unparalleled uncertainty. The council has stepped up during this period of unprecedented crisis and we will continue to do everything we can for our residents in supporting them through this period of time, unparalleled in our lifetimes. After a decade and counting of Tory austerity and year-on-year cuts, as a council we have sought as best we can to do what is needed during the pandemic and will continue do so in the future by supporting our communities through a recovery that works for everyone.
Our Capital Investment Programme sets out an ambitious agenda of investment in jobs, homes, public infrastructure and tackling climate change. It will support ambitious economic plans for affordable workspace, good jobs and culture and leisure facilities in every part of the borough and will see record investment in making our area greener and in digital infrastructure to address the gap in digital connectivity that we’ve seen over the next few months.
We’re able to invest this money because of prudent use of the council’s resources and assets and good financial management over the last few years despite government cuts. But that investment, and our ability to support our residents as we have over the last few months, could be put at risk if the government doesn’t keep its promises to fund local authorities for the work we’ve done to fight Covid-19.
Cllr Maria Kay