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Covid-19: Support for Local Authorities

Volume 678: debated on Tuesday 7 July 2020

Last week, the Government announced a comprehensive package to support councils in responding to the pressures caused by covid-19. We have now provided more than £3.7 billion of additional grant funding for councils, and announced a major new scheme to reimburse them for their lost income.

Fears have been expressed that the Government will fully bail out financially poorly managed local authorities, while better managed local authorities, such as the London Borough of Bromley, may have to meet covid-19 shortfalls through their reserves. Will my right hon. Friend offer reassurances on that point? If covid-19 funding shortfalls remain, will he consider allowing a capitalisation directive to enable councils to fund one-off shortfalls through capital receipts or borrowing?

We have always taken the approach that borrowing is allowed for infrastructure and capital projects, but not day-to-day revenue. That policy will continue. At the same time, all councils have received support, and £16 million has been allocated to Bromley. It is right that the support addresses councils’ varied needs, and that is very much the approach that we have taken.

Of course, one of the areas that local government has gone into more in order to fund its services is commercial investment. The package last week does not cover the shortfall in that, which is hitting some local authorities very hard. A number of them are looking at section 114 notices. Is the Minister prepared to see councils go bankrupt on his watch, or is there a package of support for those councils?

The Chair of the Public Accounts Committee will know very well that commercial income carries risk for councils investing in it. We are cognisant of that fact. I advise councils, where there is the risk of a section 114, to talk to the Secretary of State for Housing, Communities and Local Government ahead of any such decision.

The Prime Minister promised to do whatever it takes, and the Housing Minister told councils:

“spend whatever it takes, the Government will reimburse you”.

Will the Minister reaffirm that pledge? Councils need certainty. Many are already cutting services, and the one-size-fits-all approach simply does not work. Will he further commit to the principle that packages announced by the Government should meet the financial cost of coronavirus, and the social need for those local authorities?

The hon. Gentleman will know that the cost for local councils will be uncertain for some time, not least in terms of the impact of lost tax income. That is why we have addressed the short-term pressure through the £3.7 billion grant and additional funding that has been allocated, including the recent £600 million for infection control.