Edinburgh Council faced with £50m black hole in budget due to COVID-19

The prediction is based on three months of lockdown, followed by three months of slowly reduced lockdown.

By Conor Matchett
Tuesday, 21st April 2020, 7:30 am
Updated Tuesday, 21st April 2020, 5:01 pm
Edinburgh Council could be hit by a £50m black hole in its budget.
Edinburgh Council could be hit by a £50m black hole in its budget.

Edinburgh taxpayers could be hit with a bill of more than £50m due to the impact of the coronavirus crisis on council coffers, the Evening News can reveal.

A report from Edinburgh City Council officials on the financial impact of COVID-19 on the council’s finances is due to be discussed at Thursday’s Leadership Advisory Panel - the emergency decision-making committee of the council.

Opposition councillors have criticised the decision to discuss the meeting in private, stating that budget decisions are usually discussed in private and there is no real reason for stopping the full report being aired in public.

Edinburgh's budget was agreed in February, but has been hit hard by the Coronavirus crisis

Council leader Adam McVey said the decision was made due to commercial sensitivities around the report, and stressed further updates will be forthcoming and presented to council committees once they have reconvened once recess ends.

The Capital’s revenue budget, which covers the council’s day-to-day spending, has been hit hard by the ongoing crisis.

Both expected income from the likes of parking tickets and planned savings agreed in February’s budget has either disappeared or been put on hold due to the pandemic.

Sources within the council confirmed the report highlights a potential black hole of more than £50m if the city is faced with a total of three months of lockdown, followed by another three months of slowly reduced lockdown measures, and no action is taken.

However, it is understood that the final amount is likely to be significantly lower than £50m due to expected, but not yet agreed, funding from government sources.

Millions have already been earmarked for local government with more set to bid for by COSLA - the body which represents councils on national issues.

Such funding is likely to see more than £10m given to Edinburgh, with more likely to follow in the coming months.

The gap in the finances has appeared due to a significant drop in the use of council services and the ongoing impact of the lockdown on several council-owned arms-length companies.

One of the main sources of income for the council is its bus company, Lothian Buses, which has seen its takings from fares plummet as it cut back services and passenger numbers dropped to close to zero.

Edinburgh Leisure, which operates several of the city’s biggest leisure centres, has also had to close its centres, leading to a loss of income for the council.

The council has also seen dramatically reduced or a complete eradication of income from paid-for services including planning application fees, building warrant fees and council learning programmes.

Lack of income from on-street parking is one of the biggest contributors to the budget shortfall after the council suspended all parking restrictions shortly after lockdown was announced in March.

Planned savings agreed in February’s budgets are also now unlikely to be met due to the coronavirus crisis raising the demand on frontline services and increasing the pressure on staff.

The decision to hold the meeting in private was criticised by opposition councillors who called for the papers to be released into the public domain.

The Conservatives’ finance spokesman Graham Hutchison labelled the decision “bizarre” and said he was “extremely uncomfortable” with the discussion not being held in public.

He said “I have not had an explanation as to why the item needs to be considered in private.

“It is a bit bizarre that the finance leads of opposition groups are not able to scrutinise a finance paper.

“We know there are going to be budget challenges due to coronavirus but that makes it all the important to have this discussion in public.”

Conservative group leader Iain Whyte added: “There is a basic principle that if the issue is embarrassment, embarrassment is not a reason to keep information secret.”

Finance spokesman for the Greens, Gavin Corbett, said: “I don’t think anyone will be surprised at the scale of the funding abyss for the council.

“Extra money has had to go into services like homelessness, protecting children and food distribution while, at the same time facing dramatic falls in income from areas like parking charges and fees for services.

“It is not going to be possible for the council to find that money without further government help.

“Personally, I think a way needs to be found to have the budget discussion in public because I think people in Edinburgh need to see the challenge facing the council in order to support calls for extra help.”

The leader of the Liberal Democrat group, Robert Aldridge, added: “Clearly the coronavirus and the response to it is going to cost every council an enormous amount of money and obviously the crisis means the council will have less of an income from areas like parking.

“It may find it difficult to implement some savings that it had previously identified and there will be a whole host of services that will end up costing us more. It is important for us to keep a grip on that.

“I am always of the view that as much as possible should be held in public.”

Leader of the council, the SNP’s Adam McVey, said: "Our first priority is to support our communities through this extremely challenging time and we're working hard to make sure that resources are available to do just that.

“We will absolutely be publishing a full financial impact study when we get a better understanding of what the council's position is, and I expect an update on this work to be publicly available in a matter of weeks.

"The position is fluid and affecting many partner organisations so there is very good reason for having this initial discussion in private to ensure members have that information and can ask questions. This is not a final paper by any stretch of the imagination and it's disappointing to see draft details shared in this way.

"There will be full budget updates at our Policy and Sustainability Committee, which we hope to reinstate every fortnight, if agreed at Thursday's meeting, and the vast number of these committee discussions will happen in public to provide transparency and accountability."