Lewisham faces going bust because of multi-million pound Covid-19 hole in its budget

By Grainne Cuffe, local democracy reporter

A town hall faces a Covid-19 funding shortfall which will swallow up all its cash reserves.

Lewisham Council’s estimated funding gap from the Covid-19 outbreak represents more than all of its spare money put together.

The council is estimating a potential £82.7 million coronavirus hit on the 2020/21 budget – extra costs of £22.9 million and lost income of £59.8 million. 

A report to its councillors says: “Assuming the remaining estimated collection fund lost income of £11.5m is met, the outstanding financial gap for the council is estimated at £20.2 million.”

But the town hall’s unallocated council reserves are £20 million.  

The Government initially promised to cover councils’ costs for tackling the pandemic, but has appeared to backtrack. 

A spokesperson said the Treasury “announced unprecedented support for public services, workers and businesses to protect against the current economic emergency”, including £3.2 billion of additional funding for local authorities. 

Presenting the report to mayor and cabinet on Wednesday (June 10), cabinet member for finance and resources, Cllr Amanda De Ryk, said the impact of the Covid-19 is “deep and widespread”.  

“I know that I speak for us all when I say that my thoughts are with those that have suffered illness and loss,” she said.  

Based on monthly returns submitted to the Ministry of Housing, Communities, and Local Government, she said “it is evident that the £18 million received so far is only likely to be a third or a quarter of the funding we will need to cover us until we’re able to return to a position of financial normality”.  

Cllr De Ryk also said the agreed cuts of £16 million announced in the February budget were at risk because of extra pressures on services, adding that demand will “almost certainly” increase.  

“With the news emerging that poorer areas have double the death rate of wealthier ones, and with health outcomes for ethnic minorities disproportionately lower, it’s clear that the true cost of Covid is still being counted.  

“Faced with this crisis the council saw what needed to be done and we’ve done our best to do it, irrespective of costs,” she said, asking that the council needs the Treasury to meet the full cost of that response.  

“If we really are, as Rishi Sunak said, all in this together, it’s time for Government to put its money where its mouth is,” Cllr De Ryk said.   

Cllr Jim Mallory, chair of the public accounts committee, set out recommendations for the report.  

He praised the voluntary sector for their role in supplementing care services during the pandemic, and said the council must send out a message “very soon” that “says to them, without you we wouldn’t have managed to deal with this crisis as well as we have”.  

He also the council needs to keep on top of the financial situation, to “keep getting reports”, and continue to argue for needs-based funding, “based on the importance of local services and experience of densely populated areas”.   

Cllr Mallory also recommended continuing to argue for scrapping the fair funding review formula.  

The report was approved unanimously by cabinet members.