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Some of the largest UK councils say they may have to declare themselves effectively bankrupt unless the government agrees to further support.

Five councils said emergency spending controls – so-called section 114 notices – could be needed due to the impact of Covid-19.

Nearly 150 authorities have forecast a combined budget shortfall of at least £3.2bn, the BBC found.

The government said it was working on a “comprehensive plan” for councils.

A BBC investigation found across the UK councils:

  • At least five English councils warned they may meet the criteria to issue a section 114 notice at some point without more government support, declaring themselves effectively bankrupt
  • They include some of the UK’s largest unitary authorities – Leeds, Wiltshire, Trafford, Tameside and Barnet
  • Liverpool’s Mayor Joe Anderson previously warned the city may decide to issue a section 114 notice but the authority said on Wednesday it was now planning to set a revised budget in September to address a £58.6m shortfall
  • Birmingham City Council – the largest authority in Europe – said “given the size” of its forecast shortfall of £212m across 2020-21 and 2021-22. after £70m government funding already received, a section 114 notice “would not rectify this situation”
  • Of 173 local authorities who responded to the BBC’s questions, 148 predicted a budget shortfall
  • At least 20 local authorities plan to hold an emergency or in-year budget
  • At Highland Council in Scotland, the estimated shortfall is equivalent to £411 for every resident

Whitehall has already given £3.2bn funding to all English councils in two tranches to help cover coronavirus costs.

Why are councils struggling financially?

Lost business rates, council tax holidays and emergency payments for families whose incomes have disappeared have all hit upper tier councils’ income, at the same time as rising costs of adult care and providing protective equipment for carers.

Some of those councils would also typically depend on tourism for large chunks of income, such as dividends from airports they own or parking fees from visitors.

Facilities like council-owned leisure centres, which would normally produce income for authorities, are also closed.

Plummeting passenger numbers at Luton Airport are contributing to a £49m shortfall at the authority which owns it, Luton Borough Council. A spokesman said it would have “no option but to agree to unprecedented cuts to key services” if more cash was not made available.

Manchester City Council is losing out on more than £130m income this year from sources such as the council’s part-ownership of Manchester Airports Group (MAG).

Sir Richard Leese, leader of Manchester City Council, said: “It is no exaggeration to say that we are on the edge of a financial precipice.”

England’s Minister for Local Government, Simon Clarke, said the £3.2bn funding already given to local authorities was “part of a wider package of support from across government for local communities and businesses – totalling over £27 billion – including grants, business rate relief and for local transport”. Read More…………….

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