Thanet council Cabinet members will discuss ‘difficult decisions’ that need to be made to plug budget gaps caused by the Covid pandemic.
The lockdown from March 23, combined with many people living on 80% wages through furlough and businesses attempting to exist on government grants and adapted business schemes, means the council has suffered financial losses in areas from parking fees to council tax and business rates.
Thanet council faces a loss of £5.5million for this financial year (2020/21) although £1.5million of government funding has been received and a further tranche of funding estimated at £1.1m will leave a budget gap of £3.05m.
Covid impact
Council losses are made up of £3 million from fees and charges -inclusive of £1 million is car parking fees – £1.5 million from Council Tax and Business Rates and £1 million of additional estimated expenditure.
Resources have also been used for the council’s community response to the crisis with a helpline and coordinating food deliveries to vulnerable people in partnership with established groups.
Cabinet members will discuss the use of council reserves to plug the current shortfall – although it is forecast that the district will see increased costs whilst also experiencing a loss of income.
Reserves at the 2019-20 year-end were £2million unallocated and £12.452million earmarked spending.
Losses
A report to councillors say the reserves are already low. However it also states: “The council is facing unprecedented challenges this year as a result of COVID-19.”
Losses include licensing income, on and off-street parking fees and planning fees. There has also been the need to spend more on agency staff for increased bin collections and additional £60,000 costs for PPE.
Reduced income of some £270,000 from the council owned car park at Dreamland is predicted.
The report says Government expects councils to meet the first 5% of losses in full, representing a ‘reasonable’ degree of volatility, and then will fund 75p in the pound of all losses beyond this.
However, current government guidance indicates that any losses incurred to the Council’s leisure services will not be covered as this is operated through a leisure trust. The report says: “This is a concern for the council and TDC will be lobbying the government for a change in position.”
Losses from the closure of Your Leisure services have been estimated at £160,000.
‘Freezing expenditure’
The report also says: “The size of the potential gap is so large that there is the possibility of a Section 114 notice – this is when the Section 151 Officer informs the council that it is going to run out of reserves, or that its expenditure plans exceed its income and results in freezing expenditure.”
It adds: “The situation is still very difficult to assess and officers across the council have tried their best to arrive at reasonable estimates of additional expenditure and loss of income from sales, fees and charges. However, in some cases, the expenditure is still yet to be incurred, or the fees income is still yet to be lost. To manage this situation, it is proposed to immediately fund all expenditure incurred or committed by transferring reserves to appropriate budgets, but to hold in a ‘Covid-19 Shortfall’ reserve sufficient to cover expenditure and income losses from sales, fees and charges.”
A S114 notice effectively means a council is facing bankruptcy.
The report says: “The difficulty with removing £3.05m of reserves is that it will cancel projects and expose the council to financial risk.”
Spending plans ‘on hold’
Measures to deal with this could include moving plans to spend on large project back a year. These could include postponing payments on a TDC housing company (£1m), Parkway Station (£2m), Public Toilet refurbishment (£750k) and new Office Accommodation (£3m) to 2021/ 2022.
Leader of Thanet District Council, Cllr Rick Everitt said: “Our priority is to protect services and to continue to provide support for local residents and local businesses. We will have to make difficult decisions but every effort has been made to identify reserves that avoid a reduction in services or cuts to projects.
“As the report addresses one-off issues occurring this year, reserves would be used to fill the budget gap, rather than needing to use day to day services’ budgets. It will be necessary to replenish these reserves in the medium to longer term.”
The meetings will be held on July 30.
The full report has been published here
