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Cambridge City Council

Council facing financial shortfall due to lack of full government pandemic funding

News release from 15 July 2021

A REPORT has outlined how Cambridge City Council is facing a significant financial shortfall because costs associated with the pandemic have not been covered in full by government funds. 

A report presented to the council’s Strategy and Resources Committee on 12 July estimated that, so far, the cost of the pandemic to the council is £18.5million.  

This is largely due to increased spending on housing and providing accommodation for former rough sleepers, alongside reduced income from car parking, Council Tax and Cambridge Live events.  

These additional costs have only partially been mitigated by government grants, so far totalling £11.3m – or just 61.3% of the additional net expenditure - leading to a shortfall of £7.2m. 

Similar financial challenges are faced by councils across the country. A recent National Audit Office (NAO) report set out how local authorities have faced a range of cost pressures due to the pandemic.  

These include the need to deliver new programmes and services, increases in the costs of, and growing demand for, some existing services and reduced opportunities to deliver savings programmes. 

The NAO report describes how COVID-19 has created around £6.9 billion of cost pressures in 2020-21 with councils facing reductions in non-tax income amounting to a loss of around £2.8 billion in 2020-21 due to the pandemic.

The NAO report also says district authorities, like the city council, have on average suffered greater budget impacts than other authorities as a result of the pandemic, facing, on average, 20% additional financial pressures (as a % of revenue expenditure) due to higher costs and lower income during 2020/21. 

District councils have spent an additional £376m on Covid-related measures and suffered £1.45bn in lost income according to the Ministry of Housing, Communities and Local Government

Cllr Mike Davey, Executive Councillor for Finance and Resources, said: “The government promised to cover council losses associated with the pandemic, but so far they have not delivered in full. 

“It means that we may be forced to make some difficult decisions to ensure that essential services are not affected in the coming months and years. This would be due to the enforced reduction in income and lack of clarity over further government funding for councils. 

“Over the last 16 months since the start of the pandemic, councils and council officers have really stepped up to play an absolutely vital role in countless ways to meet the challenges of the pandemic.  

“During this period people have seen the very best of local councils. It would be ironic if the vital services we provide were threatened due to lack of government intervention – or we were again forced to use reserves which we have so carefully built up over many years.”