Coventry City Council is forecasting an overspend of more than £9 million in the first report on its finances of the financial year, with inflation and energy prices the main cause.

A report to be considered by councillors at the next meeting of Cabinet later this month shows the latest position on how much the Council will spend on its services and capital schemes this year.

It shows the predicted impact of rising costs including the effect of a proposed pay award to Council employees, a doubling of energy costs, challenges in managing budgets for looking after vulnerable children in the city due to growing demand and the costs of the refuse strike in the city which has now come to an end.

Cllr Richard Brown, Cabinet Member responsible for finance, said: “We are dealing with a very difficult set of circumstances currently and face a real challenge to balance our budget this year.

“Just like residents, councils across the country are not immune to the national financial pressures and face the same soaring energy prices and record inflation levels that every household is having to deal with.”

The financial forecast includes additional inflationary costs of nearly £8 million, as well as a £4 million overspend in Children’s Services due to increased numbers and higher costs of placements.

There are also costs in excess of £4 million resulting from the strike by the Council’s HGV drivers – expenditure needed to provide a service to residents while protecting the Council from even more financially devastating equal pay claims that could have cost up to £30 million.

Although there are some predicted underspends in other budgets, the report shows the overall expenditure forecast is £246.9 million compared with a budget of £237.4 million for 2022/23.

At the same time the Council is predicting spend of more than £165 million on major capital projects, include school expansion schemes and buildings within the Friargate scheme. The report also sets out the approach being taken to build a new home for children with disabilities as part of its overall strategy for looking after vulnerable children in the city. The vast majority of this capital funding is secured from external sources meaning it cannot be used to balance the books.

The Cabinet report sets out the steps that the Council will take to move towards a balanced budget with managers being told to identify areas where they can manage expenditure levels. It means the Council does not need to take any extraordinary action at this stage to respond to the financial position.

Cllr Brown said: “This is a worrying position for the Council to be in especially coming after the significant disruption and additional costs incurred as a result of COVID-19.

“However, the position we find ourselves in is not unusual to many other local authorities, as none of us are immune to additional costs, and I’m confident that we will turn this position around and are in a strong position to balance the budget and maintain essential services.

“But no-one should be in any doubt that this is the most serious financial position that we have faced for some time, and we should anticipate some massive challenges over the next couple of years when we set future budgets. Of course, this is coming just at the time when the Council will be under pressure to help citizens through the cost-of-living crisis.”

Cllr Brown added: “I have instructed officers to bring the budget into line, but I also expect the Council to push forward the major schemes and projects that will deliver future benefits to the city.”

The finance report will be discussed at Coventry City Council’s Cabinet meeting on Tuesday 30 August.

Published: Friday, 19th August 2022