Councils threatened with bankruptcy by coronavirus crisis, says Ipswich borough leader
PUBLISHED: 05:30 15 May 2020
Councils across the country could face bankruptcy unless the government comes up with more support over the next months, according to Ipswich borough leader David Ellesmere.
He said the loss of income from sources like car park fees and charges for leisure, swimming, and theatre tickets would be crucial.
Ipswich has not been in too bad a shape financially, compared to some other authorities - but Mr Ellesmere said: “Unless the government comes up with a new financial settlement, district and borough councils across the country will be facing bankruptcy.
“It won’t be Ipswich, not in the first place anyway, because we’re in a better place than many others, but because of the changes we’ve seen over the last few years there will be real problems for many authorities.”
Over the last decade, direct government grants to district councils have been almost totally eliminated. Local authorities have to rely on council tax receipts, fees, charges and – in many cases – investment income.
Ipswich council is supported by income from Ipswich Borough Assets, which was set up to buy commercial property in the area and use rents as an income stream for the council.
Mr Ellesmere said this income was continuing to support the borough. Many of its properties are occupied by retailers who are continuing to trade during the coronavirus crisis.
“But the loss of fees and charges is very serious,” he added. “We have lost all income from leisure and car park income is tiny in comparison with what it is usually.”
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In the early days of the crisis, the government had said it would support councils – but recent statements from ministers implied that support was not guaranteed.
Ipswich council is Labour-controlled. Other Suffolk councils are run by Conservative administrations. They appeared to be operating a “wait and see” policy on council finance.
Babergh and Mid Suffolk councils have set up a property company, CIFCO, to provide and investment income to the authorities.
Emily Atack, managing director of CIFCO, said: “As you can imagine, we have been closely monitoring CIFCO performance over recent months. CIFCO made its full repayment to the councils in March, having collected over 70% of the March quarters rent, bringing the total net return to the Councils for 2019/20 to £1.634m up from £1.4m last year.
“We are expecting the June quarter to be more challenging, however still expect rents received to exceed any borrowing costs that need to be covered by the councils.”
Babergh council leader John Ward said: “It’s still too soon to know the full financial impact of Covid-19 on our councils.
“The picture is changing on a daily basis as we have new situations to respond to and new information from the Government to factor in.
“We do know, however, that we are and will continue to incur significant additional costs as part of our response to supporting our communities; and also significant loss of income.
And Mid Suffolk cabinet member for finance John Whitehead said: “We share the frustrations of individuals and businesses everywhere in not yet knowing exactly how Covid-19 will affect our finances.
“We are meeting virtually on a regular basis as we attempt to tease out the various streams of financial information but, although we know the key areas that need close monitoring over coming months, any emerging numbers will be tentative only for at least a few more weeks.”
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