Recession Causes Sharp Drop in Council Income

New figures show a £4bn deficit equivalent to losing £11m a day


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New figures published today show that town halls have been hit by a £4bn deficit in income over the course of the last two years, currently equivalent to losing out on almost £11m every day in this year compared to financial year 2007/08.

Figures revealed by the Local Government Association, which represents over 350 councils in England, show that some key council income flows have been hit hard by a combination of the depressed property market and low interest rates.

Estimates based on the research show that in the last year, income from:
• Sales of land, council buildings and other capital projects have fallen by £2.7bn since 2007/08
• Interest earned on councils’ cash deposits has fallen by £1.3bn since 2007/08 due to low interest rates.

However, despite the squeeze on finances, LGA statistics also show that over the last six months:
• One in five councils is providing local people with help with their mortgage payments
• Eight in ten councils have concentrated resources on ensuring local people receive take up of the benefits they are eligible for
• Half of councils have set up or supported credit unions to help local people borrow money from a reliable source
• One in four councils has allowed businesses to defer paying their rates
• Seven in ten councils have provided or plan to provide tailored support to local business

Sir Jeremy Beecham, Vice-Chairman of the LGA, said, “Town halls are being hit by a perfect storm caused by the recession. Sources of income have dropped sharply at a time when more and more people are turning to councils to help them through tough times.

“Town halls are feeling the effect of recession in exactly the same way as hard pressed homeowners and families. Low interest rates mean councils are much less able to rely on their savings, plummeting house and land prices have hit hard and income from leisure centres and a range of other services has fallen.”

August 11, 2009