Swindon Tenants Campaign Group is supporting a national campaign calling for the government to cancel local authority debt as an emergency measure to help stave off the collapse of council services. There is a huge gap between the amount of emergency funding which councils have been given and the cost of dealing with the pandemic. Wiltshire council has just declared that it may have to issue a section 114 notice, indicating it has insufficient income to cover its expenditure and will be unable to set a balanced budget for next year. It’s funding gap is estimated at £50 million.

The chief executive of the Chartered Institute of Public Finance & Accountancy warned that councils were facing “a financial tsunami of increased costs and falling revenue” as a result of the pandemic. This was no exaggeration. The government told local authorities to “do whatever is necessary” and said they would support them. But the Local Government Association (which has a Conservative majority) estimates that councils will need at least an extra £6 billion more than the government has currently given, simply to get them through the year. That figure may have to be revisited because many councils have based their estimates on “a return to normal” in July. There is little chance of this happening.

Not only have councils had the costs of directly dealing with the pandemic but their income has fallen through the floor as a result of the lock-down. For instance, income from car parking and leisure services has collapsed. With the population fearful of catching the virus and no vaccination available a return to normal activities will not take place quickly. So the impact will not be limited to this financial year.

Cancellation of the debt held by the Public Works Loans Board would provide councils with an additional spending power of £4.5 billion a year. This would help to stabilise their finances and secure services whilst a discussion on long-term financing takes place.

STCG Secretary Martin Wicks said:

“Councils have been seriously weakened after 10 years of austerity. The financial consequences of the pandemic after 40% cuts in government funding of local authorities threatens the collapse not only of council services but of whole councils. Under current conditions, without the government covering extra costs and lost income, then setting a balanced budget will mean drastic cuts in services for next year, possibly even worse than Osborne’s austerity measures.

But even if they do provide funding to cover costs and losses the financial impact of the pandemic will not be limited to one year. Even without a second spike of the virus there is no way that revenues will return to their pre-covid level because of the fear of the population of catching it and the economic impact of the lock-down, including large scale unemployment.

Cancellation of local authority debt would also include council housing debt. This would provide housing revenue accounts (HRAs) with around £1.25 billion extra a year. For Swindon it would provide over £8 million a year extra for our council housing. Whilst this won’t resolve the under-funding of council housing it would help stabilise the situation. Owing to the lock-down the housing department is faced with a big backlog of repairs work.”

See the campaign website at https://cancel-local-authority-debt.org

Note:
15 Council leaders have signed the campaign’s statement calling for cancellation of local authority debt.
28 MPs, on a cross party basis, have written to Chancellor Rishi Sunak calling for him to cancel the debt.

This is a Swindon Tenants Campaign Group Media Release