£732m cost to Greater Manchester councils from coronavirus

Analysis by Greater Manchester's Combined Authority shows the financial impact of coronavirus for the ten borough councils will be around £732m.

The estimate is made up of additional costs faced in delivering Greater Manchester's response to the crisis of £236m, together with lost revenues of £496m.

The analysis shows when taking into account government grants and reserves, the total net deficit facing local government finances is £368m.

The research is based on current rates of infection and expectations around lockdown and does not take into account a second wave of cases or any increase in lockdown restrictions.

The ten councils across Greater Manchester also estimate that they will face an additional costs of £225m by the end of the year with shortfalls occurring due to business rate and council tax losses, of which the report states 69% of local authorities across Greater Manchester rely on council tax income.

Council tax receipts have fallen due to people's incomes being adversely affected by Covid-19, leading to an increase in those eligible for council tax support, with others struggling to pay bills or deferring or defaulting on payments.

The report anticipates a significant loss in commercial income in part because of the investment by all ten councils in Manchester Airport Group, which employees 20,000 people on site with a further 25,000 indirect jobs.

The anticipated income loss from MAG to the ten local authorities in dividends alone totals over £100m. The most severely hit council to be affected will be Manchester City Council, who have a 35% equity stake.

The Ministry for Housing, Communities and Local Government (MHCLG), has provided two tranches of funding to Greater Manchester councils totalling £167.68m, which together with other national funding for track and trace, infection control and hardship grants will reduce the impact on finances from £634m to £390m.

But, GMCA say the financial impact of the loss of at least two years dividend cannot be sustained without a significant impact on the council's budget position.

Currently, a total of £92m of reserves have been allocated by all ten councils to help plug some of the funding gaps.

Andy Burnham, Mayor of Greater Manchester. Credit: PA

Mayor of Greater Manchester, Andy Burnham, said:

The COVID crisis has landed heavily on our councils after a decade of severe cuts. Even so, they have been working wonders in recent weeks to support people and communities through this and now need and deserve the Government’s direct help. Councils will be crucial to the recovery from COVID and getting communities back on their feet, but won’t be able to play that role with a black hole in their finances.

Mayor of Greater Manchester, Andy Burnham

The GMCA and Transport for Greater Manchester (TfGM) have also been impacted by the Covid-19 crisis, with additional costs incurred and a fall in income.

David Molyneux, Leader of Wigan Council and Portfolio Lead for Resources added:

Local government finances have been under pressure for many years, and what this health pandemic has done is exposed how our public services have been stripped to their bare bones. We’ve risen to the challenge to help those who need it, but it’s been at a massive expense. The balance sheet of expenditure and losses shows the stark financial toll we’re having to bear.

David Molyneux, Leader of Wigan Council