Welsh Conservatives concerned over £315m local authority deficit

Reacting to the announcement today (August 17) of an additional £260 million funding from the Welsh Labour-led Government for local authorities in Wales, Shadow Minister for Local Government and Housing – Mark Isherwood MS – said:

“According to the Welsh Government, this brings the total in the pot to stave off the worst effects of the pandemic to almost half a billion pounds. 

“However, Welsh Conservatives’ analysis earlier in the year indicated that local authorities were likely to lose tens of millions of pounds revenue each month because of the outbreak, with deficits in Q1 and Q2 already totalling almost a third of a billion pounds* by the end of September. 

“These losses of revenue could take generations to recover from, and we need to see just what the long-term plan is to prevent local authorities finding themselves in an even worse position.

“The Welsh Local Government Association’s (WLGA) own modelling suggests that that there is the potential for budget shortfalls depending on several complex and inter-linked factors, and so flexibility is more key now than ever. 

“The Minister and her party must be willing to consider all options to ensure that Councils can continue running their services. 

“We Welsh Conservatives have already proposed capitalisation, which would allow for specified revenue expenditure to be viewed as capital expenditure, and so can be funded from capital resources such as borrowing, to provide financial flexibility to meet unexpected one-off costs.

“The WLGA has also pressed the Welsh Government to allow local authorities to borrow and invest in several significant capital programmes. 

“By doing so, these actions would contribute to a wider economic stimulus package whilst simultaneously helping to improve performance and outcomes in relation to a range of other important shared policy objectives. The proposal totals £762m and would also help to ‘lock in’ and build upon positive, transformational changes already introduced to services in response to Covid-19.

“We cannot afford to let the effect of this virus damage local authorities’ ability to run as effectively and efficiently as they can.”

* The WLGA Finance Sub Group identified a Q1 budget gap of £174m and an estimated Q2 budget gap of £141m, totalling £315m, equivalent to £52.5m each month April to September 2020.