Uncertain future for care homes identified as coronavirus crisis blows massive hole in council finances

A £55 million hole could be blown in the council’s medium term finances as it struggles to get to grips with the coronavirus crisis.

That is a worst-case scenario for Milton Keynes Council where councillors on Tuesday are set to hear that even the best case could be a financial hole of £27 million at the end of the next four years.

Anna Rulton, the council’s head of finance, has presented her report to next week’s meeting of the ruling cabinet.

“Whilst the council is facing cost pressures in a number of areas, this is dwarfed by the financial impact and risk around income,” she says.

“As with many businesses the council does not only face the short-term impact with income either reducing or ceasing altogether, but the prospect that some of this may never recover to previous levels or take a significant amount of time to do so.”

This year alone, the council is forecasting a financial hole of nearly £7 million, although finance chiefs caveat that by saying the full consequences unknown.

Care homes have been hard hit by the crisis, suffering from infections and sadly a number of deaths.

Those homes have seen the loss of income while at the same time being unable to accept new clients.

MK Council has followed Government advice to provide funding which has cost more £327,000 in three months.

“It is expected that the position is likely to get worse before it improves and there is a significant risk this could last for an extended period of time and the future viability of the sector will be a concern,” says the report.

The council has also spent money on helping care homes with personal protective kit.

It’s also planning to lose £3.7 million on parking, with no income forecast up until June, with other losses in waste collection, and income from planning.

The council has received two slabs of Government funding totalling £13.5 million to help it cope, but the council’s officers say it’s not enough.

“We have modelled three different scenarios to illustrate the scale of the financial impact that the council could face in 2020/21 and over the medium term,” says the report.

“For 2020/21 based on the current level of financial support provided by
government these scenarios provide an estimated financial gap of between
£5.7m to £15.3m.”

And by 2024-25 they are looking at a gap between £27.091 million and £55 million, the report says.

The council does have millions of pounds in reserves but does not use them to balance the budget because they can only be used once.

Alongside other councils, MK is lobbying the Government for more help. It says it needs cash so it can plan for the recovery stage of the crisis.

“The scale of this is unprecedented and all councils are feeling the financial
strain of this impact,” says the report.

Finance gurus are also anticipating a massive hit to funds as more people become unable to pay the council tax and business rates.