Local councils secure surplus Westminster funds after overstating Covid-19 budget impact

England’s local councils severely overshot the amount of money they would need to fund the fight against Covid-19, reveals a new study released today.

Councils in England told central government their net spending had swelled £7.8bn as a result of the pandemic.

However, analysis by the economic think tank the Institute for Fiscal Studies (IFS) of expenditure and income data published last month reveals their net spending had jumped by £4.1bn.

As a result, “funding provided to local government… [meant] that overall English councils received billions more in funding than their net expenditure actually increased by,” the IFS said.

Councils were incentivised to overstate the financial impact of the pandemic to secure funding from Westminster, the report said.

The bumper funding package left local councils’ finances in a much stronger position than first thought.

David Phillips, associate director at the IFS, said: “The Covid-19 pandemic has had a significant financial impact on English councils – pushing up their net spending on non-education services by approximately £4.1 billion in its first year. 

“However, this is much less than councils’ own previous estimates suggested, and means that English local government as a whole saw its funding from central government increase by substantially more than its costs last year.”