COUNCILS in England will need additional funding from central government to weather the financial storm created by coronavirus – or else make in-year “cuts to services”, according to a leading think-tank.

The Institute for Fiscal Studies warned extra funding to prop up local authorities whose budgets had been impacted by the pandemic may be necessary “if the government wants to avoid cuts to services”.

It comes amid warnings councils in England face an additional funding shortage of £2 billion for the financial year 2020–21, to deal with costs associated with coronavirus.

In addition to being hit by reduced income from council tax, rents and business rates, new responsibilities for councils coming from the pandemic include homing rough sleepers, supporting people shielding at home, and test-and-trace and local outbreak management.

The IFS said the “public health and economic effects of the Covid-19 crisis are creating a perfect storm for councils’ finances,” by simultaneously ramping up spending and depressing income.

In a cabinet meeting on Tuesday, July 28, Buckinghamshire Council leader Martin Tett said any under-collection of business rates or council tax is rolled over to next year’s budget, creating a “bigger mountain to climb”.

READ MORE: Council’s Covid-battered budget ‘best guess’ at this time

English councils estimate spending pressures of £4.4 billion this financial year, with around £1.8 billion sustained between April and June – much on social care.

Councils also forecast a non-tax income shortage of £2.8 billion – £1.3 billion sustained during the same period.

That totals £7.2 billion, with billions more in lost tax collections.

READ MORE: Cabinet approves report to steer Bucks out of lockdown

Although estimates “vary” across authorities, shire districts like Buckinghamshire will be “especially hard hit on the income side” and face the “biggest hit overall”, according to the IFS.

During the pandemic, central government has already provided £3.6 billion in additional grant funding to local authorities, which the forecast pressures greatly exceed.

The IFS estimates councils have access to £0.6 billion in specific and non-grant support, while having a nearly £1 billion loss in sales, fees and charges (SFCs).

Taken together, “this £5.2 billion in additional financial support still leaves a shortfall of £2 billion across the sector as a whole,” it said.

“If the government wants to avoid cuts to services, additional funding will therefore be needed in the coming years. Additional support and/or financial flexibilities – especially if pressures are revised further upwards – may also be needed for 2020–21 if the government wants to avoid some councils depleting a significant portion of their overall reserves or making in-year cuts to services,” it added.