Without additional financial support from the Government, councils ‘face a difficult choice between depleting their reserves to low and potentially risky levels or cutting spending on important local services’, the IFS said.
Whilst the Government has so far provided £5.2 billion in extra funds, councils anticipate spending £4.4 billion more than expected on the pandemic this year, as well as managing £2.8 billion in losses from fees and charges, leaving them with a £2 billion shortfall.
Therefore, even with Government support, the IFS suggest the crisis facing local government is likely to continue into 2021-22 when collapsing council tax and business rates collection since lockdown will continue to affect budgets.
The report suggests that ministers could consider relaxing rules that prevent councils from borrowing money to fund day-to-day services, which would help spread the pressure over several years.
The IFS has estimated that around 40 percent of councils would still be unable to balance their books even if they spent all their reserves.
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