Pandemic sees Luton's council tax income drop by more than £1m

A dramatic drop in council tax income during the coronavirus pandemic has left authorities in Luton facing a funding shortfall of more than £1m new figures reveal.

Councils across England are facing a combined deficit of more than half a billion pounds for the 2020-21 financial year, after council tax intake plummeted in the majority of areas.

Data from the Ministry of Housing, Local Government and Communities shows Luton council will have to address an estimated shortfall of £1,788,776.

A Government scheme should help to plug the funding gap, while the deficit will be spread over three years and split between the area's Police and Crime Commissioner, the local fire service, and the council as billing authority.

But the “financial hole” caused by a drastic fall in anticipated income to the authority’s collection fund could cause resource and budget pressures for years to come.

The Chartered Institute of Public Finance and Accountancy, a trade body, has warned that the end of Government funded Covid support could make it even more difficult for councils to repay the deficit.

The collection fund represents income and expenditure relating to council tax and business rates, with estimates used to help set local authority budgets.

In response to the pandemic, the Government asked councils to estimate the impact of Covid-19 on the collection of funds for 2020-21.

Just 41 local authorities expect a surplus in council tax income while more than 250 reported estimated deficits of between £14,000 and £17 million.

There were 10 councils that indicated they were not in deficit, but did not report surplus figures.

The national anticipated deficit across all councils in England rises to £546 million when surpluses are not taken into account, the data shows.

But the figures do not reflect councils' overall financial position after other funding and spending is accounted for, nor the impact of the tax income guarantee scheme announced by the Government in November.

Under this scheme, local authorities will be reimbursed for up to 75% of irrecoverable council tax and business rate losses, with payments expected to begin in the near future.