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Ministry publishes guidance for councils on local government income loss scheme

The Ministry of Housing, Communities and Local Government has issued guidance for local authorities on how to access the local government income compensation scheme for lost sales, fees and charges as a result of COVID-19.

The guidance says the new, one-off income loss scheme would compensate for irrecoverable and unavoidable losses from sales, fees and charges income generated in the delivery of services, in the financial year 2020/21.

The MHCLG said the scheme would involve a 5% deductible rate, whereby authorities will absorb losses up to 5% of their planned 2020/21 sales, fees and charges income, with government compensating them for 75p in every pound of relevant loss thereafter. "By introducing a 5% deductible government is accounting for an acceptable level of volatility, whilst shielding authorities from the worst losses."

The guidance covers:

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  • Background
  • Eligibility
  • Scope of the scheme
  • Operating the scheme
  • Annex A: Worked examples
  • Annex B: Guidance on filling out the Delta Return.

The guidance sets out three principles defining relevant losses:

  1. The income is transactional income from customer and client receipts (excluding commercial and residential rents and investment income), which is generated from the delivery of goods and services and which was budgeted for in 2020/21.
  2. As a result of COVID-19, and consequent reductions in economic activity, this income has been unavoidably lost and will not be recovered in this financial year.
  3. Compensation will be based on net losses. Where a local authority has been able to reduce expenditure, or has received other compensation, compensation will only be provided for the residual loss.

Income losses which are not covered by the principles and so outside the scheme include:

  • Investment income
  • Rental income
  • Compensation paid to third parties for loss of revenue
  • Income which was not included in the authority’s general fund budget for 2020/21
  • Income that can reasonably be recovered later in the financial year
  • Income losses which can be mitigated by reductions in expenditure, or which have already been compensated for by other government funding

The guidance can be viewed here.

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