The scale of Harrogate Borough Council’s coronavirus shortfall remains unclear as authority officials say there is “a number of unknowns” in estimating the impact of lockdown.
Paul Foster, the council’s head of finance, told a full council meeting that the council’s deficit could be anywhere between £9 million and £14.5 million.
But, in May, council officers said the shortfall could be as high as £15 million due to a loss of income on leisure, homelessness and car parking.
It comes as the authority revealed a £327,000 overspend last year, with £270,000 of that figure put down to the coronavirus pandemic.
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However, the cost is just the tip of the iceberg in what is expected to be a much larger deficit come the end of the next financial year. Other authority leaders have warned of impending bankruptcy notices at councils across the UK due to mounting deficits.
Some councils may have to look to their reserves to bail them out. Harrogate council had £27 million held over for a rainy day as of April 2019, but it remains unclear how it intends to tackle its estimated shortfall and whether or not it will use its reserves.
Mr Foster told councillors that the authority would not be issuing a section 114 notice – a drastic measure used in times of dire financial circumstances – which would ban any further spending.
He said the shortfall remains unclear at this time because of a number of factors.
“There will be a significant financial detriment due to covid-19, but it is challenging to estimate with certainty as you will appreciate there are still a number of unknowns.
“There are additional costs in responding to the pandemic, for example in the areas of homelessness and waste collection.
“However, more significant will be the irrevocable loss of income in relation to leisure, the convention centre, parking and planning. But also in relation to funding on both council tax and business rates.
“The estimated deficit ranges from £9.3 million to £14.5 million in 2020/21 depending on the assumptions that you make.
“As I’ve said, there are still a number of unknowns around when certain facilities can open, how long social distancing measures will be in place and how our customers will behave.”
Mr Foster added that the council’s deficit position will be kept under review, along with budget plans and its reserves. The outcome of the reviews are expected to be brought before senior councillors at future cabinet meetings.
A further £500 million package of funding was announced by the government last week to help with spending pressures.
Funding allocations have yet to be revealed, but the scheme is expected to reimburse authorities for lost income and allow council tax and business rates deficits to be paid over three years instead of one.
