THE COUNCIL has forecast a financial hole of almost £20 million in its budget this year because of extra spending related to the coronavirus crisis – and lost income.

But the projection is better than the worst-case scenario set out a few months ago by Brighton and Hove City Council finance chief Nigel Manvell.

In July the council faced the prospect of a £49 million hole in its budget, especially with rising bills for adult social care and personal protective equipment (PPE).

Costs were going up as income was shrinking from council tax receipts, business rates, rents, parking charges and fees for events – all related to the pandemic.

The council has received almost £19 million from the government’s emergency response grant fund and a further £15 million of government money is expected. This should cover about 75 per cent of the losses on sales, fees and charges.

Total government funding has come to £33.5 million, which is £7.5 million more than earlier budget projections.

And the post-lockdown recovery had resulted in a £4 million improvement in income, Mr Manvell said.

At a “virtual” meeting of the council’s Policy and Resources Committee last week councillors agreed to use up to £20 million – from reserves of £50 million – for “financial smoothing”.

But what the council takes out of its reserves now will need to be paid back in the future.

The council had contemplated holding an emergency budget to work out what spending to cut while also using money from reserves.

Green councillor David Gibson, the council’s joint finance lead, said that the financial smoothing approach was not raiding reserves and “kicking the can down the road” because the reserves would be replenished.

Councillor Gibson said: “I believe this very much makes sense because, as a result of the economic damage caused by covid, we are facing potentially the worst recession ever – certainly a massive hit that has knocked the city sideways.

“Reserves are for a rainy day – and frankly we’re experiencing a thunderstorm at the moment so it is the right time to use them.”

Labour councillor Daniel Yates said that he was pleased to see signs of recovery but had concerns about the effect on tourism when there was a risk of a second lockdown – locally or nationally.

He said: “I’m not really convinced we can necessarily have any level certainty about tourism, certainly over the next eight months.

“Looking forward to next summer as well, I am very uncertain and unclear about what the tourism industry will be – as they are.”

Mr Manvell said that the financial projections took into account the potentially large grant expected from the government to cover lost income.