Welsh local authorities facing large cash shortfalls as residents struggle to pay council tax during coronavirus

Local authorities are facing massive shortfalls in cash as people’s ability to pay their council tax bills is hit by the effects of the coronavirus pandemic.

A letter seen by the Local Democracy Reporting Service shows they could be hit with a shortfall of £35m this year if the lockdown continues and/or the economy falls into depression.

Last week the Welsh Local Government Association (WLGA), the lobbying body for councils wrote to minister Julie James setting out the problems councils are facing.

Across Wales authorities give discounts on council tax, for example to those living alone or those on low incomes, and Welsh Government subsidises that via the Council Tax Reduction Scheme (CTRS).

Most councils do not get all of the money back and the WLGA claims the increase in people claiming under the scheme could cost Welsh councils an extra £9m this year.

Yet that is a relative drop in the ocean to what local authorities are currently experiencing.

Collection rates for council tax are between 1% and 2% down on normal, which doesn’t sound much but could mean councils losing out on a further £26m of revenue this year overall.

To put that figure in perspective Denbighshire council would lose £700,000 for every 1% of council tax uncollected.

In the first three months of the crisis Denbighshire spent an extra £2.1m than it budgeted for and lost £6.3m in revenues because of the pandemic, mainly from leisure facilities being closed, lack of car parking charges and deferring rents from council business tenants.

If that was replicated in the next three quarters, the council would be facing an overall loss of more than £30m alone in this financial year.

Gwynedd council’s cabinet heard recently the county faces a loss of income of between £5m and £16m, depending on the length of any lockdown.

While authorities hope to receive Welsh government funding to cover at least some of the additional costs incurred during the lockdown, there is no promise of similar cash to cover loss of income from services such as leisure centres, school meals, parking, consultancy and highways arrangements.

The WLGA estimates councils across the country face losing out on around £170m of previously budgeted for income due to the lockdown and it continues to lobby Welsh ministers to fund the gap on the balance sheets.

It illustrates how many councils, despite pledges of help from Welsh Government in its budget statement last week, are walking a financial tightrope.

A Welsh Government spokeswoman said: “We are working with local government through the WLGA to monitor the impacts on council tax and the council tax reduction scheme to understand the implications for local councils of lost or deferred council tax income.”

By Jez Hemming – Local Democracy Reporter