Major new support package to help councils respond to coronavirus has been announced by Local Government Secretary Robert Jenrick today, Thursday 2 July, as part of a comprehensive plan to ensure councils’ financial sustainability for the future.

The government has delivered an unprecedented package of support to councils over recent months, and councils in England will now receive a further, un-ringfenced £500 million to respond to spending pressures they are facing.

Recognising that councils are best placed to decide how to meet pressures in their local area, this funding has not been ringfenced. In addition to this funding, a major new scheme introduced by the government today will help to reimburse lost income during the pandemic and boost cash flow.

Where losses are more than 5% of a council’s planned income from sales, fees and charges, the government will cover them for 75p in every pound lost. Additionally, to enable them to get on the front foot and build much-needed breathing space into their budgets, the government is also bringing in changes so that they can spread their tax deficits over 3 years rather than the usual one.

Overall, in the last 6 months, government has worked closely with local authorities to understand their needs and provided more than £27 billion to help councils, businesses and communities through COVID-19.

This comprehensive support includes:

  • £3.2 billion of new funding to councils
  • £600 million to adult social care to support providers through a new infection control fund
  • Over £20 billion in support for businesses
  • £500 million in council tax hardship funds to offer economic support to the most vulnerable
  • £300 million to support track and trace

Further details on the allocations of the funding will be made in due course.

The new income loss scheme will involve a 5% deductible rate, whereby councils will pay the first 5% of all lost planned sales, fees and charges income, with the government compensating them for 75p in every pound of loss thereafter.

By introducing a 5% deductible the government is accounting for an acceptable level of volatility, whilst shielding authorities from the worst losses.

In the next Spending Review, the government will agree an apportionment of irrecoverable council tax and business rates losses between central and local government for 2020 to 2021.

Beyond the support provided, any council that is faced with an unmanageable pressure or is concerned about their future financial position should contact Ministry of Housing, Communities and Local Government.

The Barnett formula will apply in the usual way to additional funding. The devolved administrations will therefore initially receive almost £100 million in relation to this announcement. This comprises £50 million for the Scottish Government, £30 million for the Welsh Government and £15 million for the Northern Ireland Executive

Read the Press Release in full here