Your questions answered
Why are you making these cuts?
For more than two years Coventry has been open and transparent that nearly all local authorities – of different sizes and political colours – are facing unprecedented financial challenges due to long-term underfunding in the sector. In Coventry’s case, we have received about £100m less a year every year since 2010. Despite that massive loss, 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 in services such as social care and homelessness, as well as inflationary pressures, has brought this to a head, meaning we had to find savings of £30m this financial year and a further £11m next year.
When will you stop making cuts?
It is not something we want to do but we have to do so to meet our legal requirement of setting a balanced budget. The current government has promised to look into the wider issue of local authority funding and has promised multi-year settlements for councils in the future but, to answer the question, as things stand we cannot be sure.
Didn’t the Government give councils more money in the recent budget?
Yes, there were announcements for additional money in areas such as social care in the autumn budget, but we will not know exactly how much that will be until 19 December.
In recent years, a number of councils have gone bankrupt, but they still keep going, so aren’t you crying wolf?
For the last two years Coventry has said locally, regionally and nationally that the way all local authorities are funded needs to be reformed as it is no longer fit for purpose. Without any changes, more and more councils – and Coventry is one – will increasingly struggle. Councils that have issued Section 114 notices that effectively mean bankruptcy, are taken over by commissioners that take away decision-making on a local level and without consultation. Councils with 114 notices have seen services cut, assets sold and double-digit Council Tax increases – way above the current permitted 5% annual rise. Additionally, some Councils have also required extraordinary financial support from the government.
But every council would say they need more money, wouldn’t they?
In Coventry’s case, we have independent evidence that shows we have a compelling case. As well as the examples given above, Coventry featured prominently in an independent report published by the Institute of Fiscal Studies that singles out the city. It found local government services are underfunded by around £50m based on relative need.
We also receive less funding per head than the West Midlands and national average. The Council receives £78 less funding per head of the population than the national average – or to put it another way, £28m less a year than the national average. Receiving an average amount would be a game changer for the city and would mean we would not need to be looking to make any cuts for the next financial year.
You put up Council Tax every year, so any reduction in funding has been offset by those increases, hasn’t it?
Since 2010, we’ve lost about £100m per year in government funding. In comparison, a 1% increase in Council Tax approximately means a £1.7m monetary increase for the Council. Legally we can only raise Council Tax by 2.99% (not including a 2% social care precept). As this demonstrates, the Council Tax increase, while necessary, is barely scratching the surface of our funding issue. Ideally, we do not want to raise Council Tax. We’d prefer our core government funding be increased which is why we continue to engage with Government to find a long-term solution to this funding issue.
I read recently that Coventry has about £30m outstanding in unpaid Council Tax. Why don’t you concentrate more on recouping that?
We are. We are acutely aware that the Council serves some of the most disadvantaged areas in the country and nearly everyone has been negatively affected by the cost-of-living crisis and high inflation that has compounded the problems we all face. This has seen people fall behind with payments across the country, but the Council is doing all it can to ensure that money owed is paid to us.
Is this a genuine consultation? Haven’t you already made up your mind on the cuts you want to make?
This is a genuine consultation, and we haven’t made up our mind. The only thing we are certain of is that doing nothing is not an option. We do not think we have all the answers, so alternative suggestions are welcome as part of the consultation process.
You talk a lot about demand being a cause of financial challenges along with underfunding. Demand will come and go, won’t it?
Unfortunately, over the last 14 years, the evidence does not suggest that demand comes and goes – the trend is that demand has continually increased over this period. In 2010 for example, about 50% of our net budget was spent on children’s social care, adult social care and homelessness, but today it is over 80%.
You say you’ve got no money but are in the process of appointing two new director posts. You’d save money by not going ahead with those.
The two new posts are cost neutral and are funded by using the money of other senior officers who have left and not been replaced. There is also a proposal within the budget for further savings from senior manager posts of £1m over the next year.
Population growth in recent years has been led by students and migration. Don’t we need to have less of both?
The Council is proud of Coventry’s two universities and the financial and regeneration benefits they bring. Similarly, we are proud of our history as a City of Sanctuary and a designated place of Peace and Reconciliation. We have welcomed those fleeing persecution from conflict, providing support to enable individuals to make a positive contribution to the social, civic and economic fabric of our city. We have raised concerns nationally of the need for a fair and equitable dispersal programme, but the problems we face are as a result of under-funding over more than 14 years and that needs to be addressed.
Why are you spending more and more money on migration services?
It is important that people who have newly arrived in the city have support services to ensure they are able to integrate and are able to contribute to the wider society. All of these services are grant funded – meaning the money comes from central government sources. No Council Taxpayer money is used to fund any of these services.
Why don’t students have to pay Council Tax? You’d have more money if they did.
The law states that being a full-time student classifies you as a "disregarded person" and, therefore, you don't need to pay Council Tax under any circumstances. That is a national law and not in the Council’s gift to change.
Why are you cutting Council Tax support for the most vulnerable?
We’d rather not impose any cuts on low-income households, but this change would keep Coventry broadly in line with the majority of other councils across the country. This change would not affect people of pension age.
You have millions of pounds in your reserves. Why doesn’t the Council use them to meet the financial shortfall?
We have already used reserves to bridge the shortfall in the past, including spending almost £2m from them last year to manage the overspend. We are currently predicting an overspend of around £10m this year which will also have to come from reserves. As things stand, we have £31m in reserves that is uncommitted and can be applied to this overspend. However, an overspend at this level would mean that reserves would be down to £21m. Using reserves helps for one year but does not provide a long-term solution. We do hold other reserves, but these are already committed to ongoing projects or are held on behalf of others – for example, we hold almost £58m in reserves that is either owned by schools or is pooled money with the NHS.
Isn’t the financial situation you find yourself in of your own making?
No – any organisation that has received more than £100m less in funding for more than a decade and receives £28m a year less than the national average is going to eventually struggle. In fact, to continue to deliver hundreds of services a year over a sustained period of considerable funding cuts demonstrates the prudent decisions taken by the Council over the last 14 years.
But you’ve spent money on things like bicycle lanes. That money would have been better spent on bridging your budget gap wouldn’t it?
Coventry City Council has been very good for many years at successfully applying for external funding for specific projects. However, this money can only be spent on the schemes the funding has been awarded to. Projects such as the Binley and Coundon cycles lanes have been paid for by a number of such grants and not from Council Taxpayers’ money. It is important that we continue this work as it is not costing Council Taxpayers anything and is helping the city meet its ambitions of being greener and promoting health and wellbeing.
You’ve invested in a range of businesses in recent years such as Tom White Waste and Coombe Abbey. Has spending money on this contributed to the problems you face?
The Council has a number of commercial investments including company shareholdings and property. Our portfolio gave us a collective return of 5.7% last year. This income has been critical in funding frontline services and helping us overcome the lack of funding in previous years. Indeed, without it, further cuts to services would already have had to be made in the past.