The financial context
For a long time, we have been open and transparent that Coventry City Council - like many other local authorities of all political colours across the country - are facing severe financial challenges.
Compared to 2010, our net budget is £100m less every year from the Government and we have prudently managed our budget to ensure we meet our legal duty of setting a balanced budget. However, in recent years, the collective result of these severe cuts in funding and rising demand for services such as social care and homelessness has brought this to a head.
The city receives one of the lowest funding per head of the population in the country (Coventry £821, England average £910) as well as one of the lowest in the West Midlands which can be seen in the graph. Indeed, independent research by the Institute of Fiscal Studies which looked at funding compared to need, demonstrates a gap of £31m between Coventry’s funding per capita compared with the average Local Authority funding per capita figure.
Added to this, Coventry has seen an overall increase in demand which far exceeds available funding. The Council now spends 79 per cent of its net budget on social care and housing (£206m) and homelessness, up from 40 per cent in 2010. This means £54m is available from its net budget for other Council services.
At the same time, Coventry City Council is what the Government defines to be a ‘tariff authority’. As part of this, £22.2m from business rates we collect are paid back to Central Government.
On top of all this, the Council – like all public sector services – has been hit by inflationary pressures. The cost of fuel, electricity, gas and other essential things we need to deliver the more than 600 services across the Council has risen unprecedentedly over the last 12 months just like it has for all the residents and businesses we serve. We expect funding for local government to increase by 3% nationally. This does not reflect inflationary increases or rising demand meaning effectively it is a cut.
We continue to make internal efficiencies, which amount to over £20m of savings for next year. But despite this we have had to make cuts. Without making these cuts, the reality is that we will not be able to set balanced budgets in the future and will eventually run out of reserves to fill the gap. No action would mean that we would be forced to issue a Section 114 notice in the next few years effectively meaning we are bankrupt.
We continue to urge the government to look at the way it funds Local Authorities and we have written to the Secretary of State for Levelling Up, Housing and Communities of the United Kingdom on multiple occasions.