Levelling up promises cannot be met until councils are fully compensated for coronavirus, thinktank warns

The Centre for Progressive Policy (CPP) released figures this morning which showed effective bankruptcy threatens eight out of ten local authorities despite government support, and that the strain will be hardest felt by the most deprived communities, putting the government’s levelling-up agenda at risk.

The Government has handed £3.2bn to councils in support, but the Local Government Association (LGA) has estimated £6bn will be needed this year alone.

It comes after warnings from the County Council Network - which represents all 25 county councils and 11 county unitary authorities - earlier this month that all 39 of the county and unitary authorities included in their research could use up their available reserves in 2021/22 to cover a funding shortfall of £2.5bn.

The CPP found that despite emergency non-ringfenced Covid-19 funding, 131 upper tier councils out of 151 in England did not have sufficient funds to make up for projected increased costs and reduced income due to Covid-19. This includes 18 out of 19 of upper tier authorities which significantly feature former Red Wall constituencies.

The report said: “This will compound the effects of a decade of austerity.”

It also said deprivation and need should be criteria in distributing additional funds.

And it added: “As a result, the government needs to recommit to giving its full financial support to councils for Covid-19 losses before it can return to the levelling up agenda.”

The report was quoted by Labour leader Sir Keir Starmer during Prime Minister’s Questions..

He said: “There's a report today that eight out of 10 councils faced bankruptcy or cutting services. Many of those are in the North East and Midlands, where as the Prime Minister knows are the worst affected areas for Covid-19.”

Boris Johnson said councils would be supported.

Zoe Billingham, the report’s author, said: “In practical terms, our view is that you just simply cannot cut corners on sort of basic essential public services, and then expect to be able to level up the country.”

She said the issue was made more complex by the fact levelling up had not been defined by the Government.

The agenda was recently given as a way of helping to alleviate racial injustices in the country in light of a Public Health England report into the impact of coronavirus on the Black, Asian, and Minority Ethnnic community.

Ms Billingham said: “There will, of course, be some members of Government who want to frame it as we can only do this or that, but they've got a choice and they know they've got a choice.

“As we saw with austerity it is a political decision as much as an economic one.”

Ms Billingham said it would be a “big gamble” to roll back on levelling up - something the Government has repeatedly said it would not do - when considering the December election put a lot of stock in the promises.

And she said she imagined many former Red Wall Conservative MPs were putting pressure on the Government to that effect.

Minister for Local Government Simon Clarke previously said: "We’re giving councils an unprecedented package of support, including £3.2bn emergency funding, to tackle the pressures they have told us they’re facing.

“In total, the Government has provided over £27bn to support local councils, businesses and communities in fighting the pandemic, including £600m to help reduce the infection rate in care homes and £300m to support track and trace.

“We will continue to work closely with councils as they support their communities through this national emergency and we are working on a comprehensive plan to ensure councils’ financial sustainability over the coming year.”