Councils have been told to look locally, not to central Government, for help in balancing the 2021 books. Instead, they will need to raise Council Tax by up to 8%.
As many people will suspect, Covid-19 has hit the cash flow of every council in the UK. All of them have seen their income plummet for the year April 2020 to March 2021, and income from business rates has all but collapsed. Our own local authority, Barnsley Council, reports that it has collected less than 35% of its usual business rates. But there is now a double whammy on the horizon: households are starting to fall behind on their Council Tax in greater numbers than ever before.
Westminster has been covering a large share of the missing business rates, but only for businesses that are still trading. Unfortunately, central Government won't cover the business rates of firms that have now closed, or of new ones that would have opened if it hadn't been for Covid-19.
Councils need extra cash, and quickly. Croydon Council has already run out of money, and we know of 13 others that could follow before April 2021. Birmingham, Essex and Manchester are the most likely to go broke if extra funding doesn't arrive soon.
Just to stand still on last year, Birmingham needs to find £163 per person. That's not £163 per household - it's £163 for every man, woman and child in the city, which works out at an extra £473 per household on average. To make up that £473 per home, it would need to raise the average Council Tax bill by 24%. That's a figure the council knows local people couldn't possibly pay.
The numbers differ across the country, but the shortfall per household is fairly consistent.
BMBC (Barnsley Metropolitan Borough Council) finance official Andrew Parkinson told local councillors: "Central Government has not yet come up with a rescue package for the next financial year, and we (BMBC) should plan for the worst. Other councils in South Yorkshire are also considering an 8% rise, and we should do the same."
When the 8% rise is rolled out across the country, it could be the tipping point for many people in the UK. Not paying Council Tax can, in the worst cases, lead to a prison sentence.
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