A DRAMATIC drop in council tax income during the coronavirus pandemic has left authorities in Dorset facing a funding shortfall of more than £11m 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 Bournemouth, Christchurch and Poole council will have to address an estimated shortfall of £9,677,685 with Dorset Council facing a shortfall of £1,350,411.

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 per cent of irrecoverable council tax and business rate losses, with payments expected to begin in the near future.

Rob Whiteman of the CIPFA said this will compensate councils for a “large chunk” of the deficit.

He added: “Ultimately, this financial hole isn’t as deep as it looks.

“But with the Government ending Covid support by the end of the year, it’s hard to see how councils will be able to afford to repay the remaining deficit without additional ‘help’ from taxpayers in the future.”

Councils also overspent by £6.9 billion in gthe year to March.

An MHCLG spokesperson said: “We’ve committed over £36 billion to help councils support their communities and local businesses during the pandemic.

“We’re also providing councils with £670 million of new grant funding to enable them to continue reducing council tax bills for those least able to pay, including households financially hard-hit by the pandemic.”

A spokesman for Dorset Council said: “The most recent budget report to Dorset Council Cabinet (in January 2021) estimated the council tax collection shortfall for the year at £7.5m. Dorset Council is doing everything possible to pursue non-payment or slow payment of council tax, while understanding that some households have suffered financially as a result of the COVID pandemic and need additional support. If anyone is struggling financially, please search for ‘council tax support’ on our website. A further report on the year end budget position for Dorset Council for 2020-21 will be discussed at the Cabinet meeting on 22 June.”

Leader of BCP Council, Cllr Drew Mellor, said: “BCP Council estimated a £9.67 million deficit relating to council tax income for 2020/21, caused by reductions in collection rates and increases in the number of people claiming council tax support.

"BCP Council’s share of the deficit is £8.01 million and the council is able to spread the repayment of this deficit into the collection fund over the next three years. The ability to spread this deficit over three years is a government response to mitigating the financial effect of the pandemic on councils.

"In addition to spreading the deficit the council will also receive a grant from the government that covers 75 per cent of eligible council tax losses. The council will allocate this grant of £1.09 million over the next three years to match the period in which it will repay the deficit.

“The financial impact of repaying the deficit has been included in the council’s budget and medium term financial planning processes. The council has set a balanced budget for 2021/22. The position for 2022/23 onwards is the subject matter for a report to the Council’s Cabinet in June which includes the details of the financial strategy to enable a balanced budget to be set.

"As part of the council’s financial planning it is forecast that council tax income will bounce back in 2022/23 as the economy recovers from the pandemic."