Council faces eight-fold increase in savings for next year if Government does not fulfil promise to support local services

Merton Council faces impossible choices to balance its budget for next year if the Government promise to fund local services.

The Council’s cabinet has released a report which shows that the combined impacts of lost income, additional costs of providing shielding and other services throughout the pandemic, and the continuing shortfall in the Government’s annual grant to schools, leave the council with a budget gap of more than £13m next year, compared to a gap of just £1.7m if the pandemic had never happened.

In April, the Government committed to support councils in doing whatever it takes to help keep local residents safe, following which Merton launched additional services from shielding services for 7,200 people, increased support for the homeless and financial support for those impacted by the pandemic.

But ministers have still to confirm who will bridge the funding gap when the Government’s annual funding settlement to councils is set next month.

At a meeting of the decision-making Cabinet, councillors will consider options to deliver non-Covid related savings of around £1.7m, while urgent work begins to understand the implications if the Government fails to keep its promise on funding.

A further update to the budget will be considered in early December – but Councillor Mark Allison, the council’s Deputy Leader & Cabinet Member for Finance, has warned that drastic cuts will have to be considered at some point if the promise to fund councils the full costs of the pandemic do not materialise.

Cllr Allison said: “The message from the Government was very clear – do whatever it takes. We played our part to the full and bridged the gap. We have been on the front line of the fight against Covid-19 – but now we need assurance the Government will make good on its promise, in order to set budgets.

“The difference between the Government providing these funds or not is massive, and if the money doesn’t materialize the impact will absolutely be felt on our local communities and those on low incomes.

“Merton is behaving in a businesslike way by setting our budget using figures that exclude the impact of Covid-19 and other shortfalls in government funding. After ten years of austerity we still have to find £1.7million of savings by March, but this is manageable and can be achieved through efficiencies and income generation.  

“We have played our part in fighting this pandemic, but without clear support from the Government that our Covid costs will be covered, we face having to find Covid cuts nearly eight times that, which will be impossible without damaging cuts to vital services.

“If they do not give us the money, the government’s Covid cuts could put vital services under threat, as well as support for homeless residents and those who need care. Their Covid cuts could stop us from reducing council tax for those on low incomes, and mean we would have to stop funding local charities.

“There is still time to save these services, and we want to carry on helping residents when they need us. We have looked after residents’ services well during the toughest period of austerity this country has seen in our lifetime, by being efficient and well run, but these Covid cuts would be like nothing we have seen before.”

The council is expecting to need to propose a 2% council tax rise next year, although the increase will be offset for those on low incomes through Merton’s Council Tax Support Scheme, which has been increased for this reason and will ensure those in hardship don’t pay more in 2021/22.

As well as concerns about the impact on the budget of spending to keep people safe during the pandemic, the council’s report also raises concerns that many councils across the country, including Merton, are not being given enough money to cover the cost of education for children, including those with special needs (the Dedicated Schools Grant), which is  impacting on the budget gap.

Although the government previously said  that councils should not fund DSG from their balances, in 2020/21 the council has set aside £16m, which is 100% of the DSG deficit, and plans to set aside more than £9m next year. Discussions have been ongoing with the Government and local authorities, which were expected to reduce the contribution from councils to cover overspends, but these have so far not resulted in a commitment from ministers.

Cllr Allison added: “We should not have to pay for the Dedicated Schools Grant, but looking after our children with special needs is of course a top priority. The government needs to settle this issue for councils like Merton once and for all, and then we will be able to plan for the future, reverse cuts and improve services.”