Derbyshire County Council facing £45 million COVID shortfall

Peter Handford, the authority’s finance chief, made the announcement at the council’s latest scrutiny meeting.

He said that combatting the Covid-19 pandemic has put ongoing and considerable future pressure on the authority’s finances.

Mr Handford said that the authority has so far received £42 million in grant support from central government but only expects to receive £4 million more.

He said the authority must focus on its own spending and how to handle the overspend ‘in-house’.

On the threat of a Section 114 notice (a freeze on the council’s finances and effective bankruptcy) and ‘financial collapse’ Mr Handford said ‘at the moment he had no intention of doing that’.

He said the council can meet its costs without ‘derailing’ but may not be able to follow through with some of the spending and savings plans the authority has, but did not specify which.

Mr Handford said the government does not feel the authority is on the brink of a Section 114 notice but must focus on medium-term budget issues.

He said the authority does not know what to expect from a potential second wave of Covid-19 and also if the national economy continues to dip.

He referred to a quote from American politician Donald Rumsfeld and that it is the ‘unknown unknowns’ that the authority has to worry about.

Mr Handford continued that a key ‘massive pressure’ is children’s social care, which is set to worsen with more children expected to need support as the pandemic rolls on.

Further issues include the £10 million rolling cost of lost savings and extra costs caused by the pandemic itself.

This includes extra fees to private care homes and missed council tax and business rates.

Another cost to the council would be the potential for the council to have to lay on double the number of school transport vehicles from September in order to transport the same number of kids entitled to it but maintain social distancing.

He said the rolling run rate is not a long-term forecast and could increase but to the unknown scale or impact of a potential second wave of the Covid-19 virus.

Meanwhile, the flooding over the past year has left the council with a £20 million backlog in repairs which is not being met by the government, despite the Conservative authority urging for support.

Mr Handford said the council does have £300 million in reserves but much of this is ring-fenced for specific uses and therefore is not necessarily all available to bail itself out.

In June, Mr Hanford said the council has been hit by a financial impact of £120 million – including extra costs, income shortfall and delayed savings.

He had said it was ‘not beyond the realms of possibility’ that the council goes the way of its Northamptonshire counterpart in having its finances frozen.

He continued that the authority’s financial position depends on the government stepping in to support it and that the council used to spend ‘very little’ on PPE (a few hundred thousand pounds).

This has skyrocketed during the pandemic to £7.5 million with Mr Hanford estimating this could triple to £20 million.

He said there is ‘some doubt’ the new regular cost of £8 million to £9 million ‘will ever return back to normal levels’ and will become the normal cost.