GREATER Manchester councils should be given cheaper short-term loans – and more time to repay them – as they face a £400m funding blackhole during the coronavirus pandemic.

That is according to the Local Government Association (LGA), who say almost £1 billion in combined business rates and council tax income has gone uncollected across England in the last three months.

Local finances have been described as ‘really, really scary’ by Greater Manchester leaders who fear going to the government for more money like ‘Oliver with a begging bowl’ despite a second bailout.

Town halls are expecting the COVID-19 crisis to take a £547 million chunk out of its coffers by the end of July, with the government so far offering £168m in compensation.

Meanwhile the Metrolink, which has seen passenger numbers dwindle as social distancing has taken hold, is expected to lose £30 million by the end of financial year.

Councils can currently borrow money from the government through its Public Works Loan Board (PWLB), where the minimum term for a loan is one year.

But the LGA says this is ‘too long’ and will do little to help immediate cash flow worries caused by coronavirus.

Coun Richard Watts, chair of the LGA’s resources board, said: “Councils are playing a vital role in leading communities through this crisis – supporting efforts to track and trace the virus, protecting the vulnerable, helping rough sleepers off the street and keeping other services, such as bin collections, running normally.

“The scale of the economic, environmental and community challenges that we will face should not be under-estimated. It is vital that councils can support the economic recovery as emergency measures are lifted and we come through this crisis.”

With finances so dire the LGA is concerned that councils will instead look at taking on short-term loans at more expensive rates, which could only make their circumstances worse.

Calls are now being made for the PWLB to offer more equitable short-term loans to ease the financial burden on councils, while also delaying repayments on all new and existing loans.

Coin Watts added: “The Government has written off debt for NHS bodies as a result of COVID-19. 

“Providing councils with access to short-term loans and delaying repayments is the least it can do to help tackle the significant cash flow problems many face.”

The calls form part of the LGA’s response to the Treasury’s plan to prevent councils from using PWLB loans to buy commercial assets primarily for yield.

Councils fear the move would have unintended consequences by making it difficult to borrow money for other purposes.