Overview
Councils are required by law to set a balanced budget every year.
In Coventry, we started the process of planning for this year's budget last April. We were already aware that there were serious funding pressures. This included high inflation and social care costs which have been building for years. As a result, we needed to take a long look at our services and have identified places where we have to make cuts.
These are difficult decisions for our organisation to make and we want to be as open and transparent with you about them as possible. To that end, we've put together these webpages to explain the situation, detail our savings targets and keep you updated on how we intend to achieve them. We'll also be sharing information on our social media pages and in our weekly newsletter [https://public.govdelivery.com/accounts/UKCOVENTRY/subscriber/new?topic_id=UKCOVENTRY_291].
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.
Your feedback
In December we began a consultation on our budget proposals
We asked for feedback from local people and had lots of helpful comments. We tried to take on board some of these and as a result, have been able to apply some changes to our plans.
But there are other targets that we have not been able to change.
Thanks to your feedback the Council has now agreed on a list of savings that means it can set a balanced budget for 2024/25. Many of these follow the One Coventry Plan [https://www.coventry.gov.uk/onecoventryplan], which uses the strength of all of our partners. Working together as a city is the only way to make our resources go further.
To explain how your feedback has influenced our budget proposals here's a short video of Cllr Richard Brown, Cabinet Member for Strategic Finance and Resources.
2024/25 budget
As of 20 February, the Council has approved the final revenue and capital budget for 2024/25
This incorporates a Council Tax increase of 2.9 per cent, which is within the Government’s limit of 3 per cent plus a further 2 per cent Adult Social Care (ASC) Precept in line with Government expectations.
The precept is essential to enable councils including Coventry to manage increases in the costs of care.
In total, the rise in Council Tax bills will be the equivalent of around £1.60 a week for a typical Coventry household including the expected rises in the precepts for Police and Fire.
The position after 2024/25 remains uncertain. Reviews about how much local authorities receive from the Government will not now happen until after a general election expected later in 2024.
Read the budget report. [https://edemocracy.coventry.gov.uk/documents/s59458/Budget%20Report%202024-25.pdf]
Read the specific proposals. [https://edemocracy.coventry.gov.uk/documents/s59460/Appendix%202%20-%20Budget%20Proposals%20and%20Financial%20Position.pdf]
Read our response to the Government's Budget. [https://www.coventry.gov.uk/news/article/4910/government-s-budget-and-short-term-plans-fail-to-solve-council-finances-problems]
Delivering our proposals
Through 2024, the Council will continue to refine and implement a programme of activity designed to review how best to deliver its services.
These have been difficult decisions for the Council to make and this webpage will keep you up-to-date with how we're delivering them.
- Changes to Council Tax Support [https://www.coventry.gov.uk/counciltaxsupport#changes]
- Charging for garden waste collections [https://www.coventry.gov.uk/brownbin]
Your questions answered
We understand that you will have questions about our budget and financial situation.
As a result, we've tried to answer some of the frequently asked questions below.
Is Coventry City Council about to go bankrupt?
No. What the Council is trying to do is highlight 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 to meet its requirements to set a balanced budget meaning a section 114 notice might have to be issued in the future.
What is a Section 114 notice?
Councils are required by law to have balanced budgets. If a council cannot find a way to finance its planned spending, then a Section 114 Notice must be issued. The issuing of a Section 114 Notice restricts all new spending apart from protecting vulnerable people, statutory services and pre-existing commitments.
A 114 notice would also mean that Commissioners would be brought in to run the Council, making decisions to cut services and reduce jobs without consultation. They would also have the ability to raise Council Tax levels far higher than the current levels that councils are restricted to.
How do you decide what services are cut?
Our priority is to protect essential services, jobs, the most vulnerable and continue to deliver key Council priorities. Anything that does not meet these criteria could either be reduced or stopped altogether. Services that we are required by law to deliver – such as social care, housing and homelessness and emptying bins – will continue but the way they are delivered may change.
Doing nothing is not an option because of the financial pressures we face. We need to find ways of reducing non-critical spending, the demand on services and reviewing assets to reduce costs and maximise income. All proposals will be subject to full consultation and final decisions will not be taken until February 2024.
You put up Council Tax every year, so any reduction in funding has been offset by those increases, haven’t they?
No. We’ve lost more than £100m in government funding every year but we are restricted to increase Council Tax by 2.99% (not including a 2% social care precept in 2023 and 2024) but a 1% increase approximately means a £1.5m monetary increase in Coventry’s case. That’s well below the more than £100m lost each year. However, we’d rather our core government funding was increased rather than being forced to put up our Council Tax if given the choice.
You say demand for services is a cause of the financial challenges along with underfunding. Demand will come and go, won’t it?
Unfortunately, over the last 13 years, the evidence does not suggest that demand comes and goes – the trend is that demand has increased over this period. For example, in 2010, 40% of our budget was spent on social care and homelessness but today it is about 75%. That increase has just been about meeting rising demand.
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 £7m from them last year to manage the overspend. We are currently predicting an overspend of more than £11m this year which will also have to come from reserves. As things stand, we have £33m in reserves that are uncommitted and can be spent on this but a £11m overspend this year means that figure would be down to £22m and without action, we are predicting a large overspend for next year. Using reserves helps for one year but does not provide a long-term solution. We do hold other reserves, but these are already committed on ongoing projects or are held on behalf of others – for example, we hold almost £65m reserves that are either owned by schools or is pooled money with the NHS.
Isn’t the financial situation you find yourself in or your own making?
No – any organisation that has received more than £100m less in funding for more than a decade, has to give up £20m in Business Rates income every year and is independently found to be an area whose local government services are underfunded by around £50m based on relative need is going to eventually struggle. In fact, to continue delivering more than 600 services a year over a sustained period of considerable funding cuts demonstrates the prudent decisions taken by the council over the last 13 years.
But you’ve spent money on things like bicycle lanes, regeneration projects and the work in Spon End. That money would have been better spent on 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 cycle lanes have been paid for by a number of such grants and not from Council Taxpayers’ money. Similarly, regeneration projects such as Friargate and City Centre South are almost exclusively funded by such grants. This was also the same for the work in Spon End, which also meant the city did not have a congestion charge imposed that some drivers would have had to pay.
It is important that we continue this work as it is not costing Council Taxpayers anything but is helping the city meet its ambitions of being greener, promoting health and wellbeing and promoting economic prosperity for the city – key priorities of the One Coventry Plan.
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 problem you face?
Our investments in businesses gave us a collective return of 6.5% return on our investments 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.
You loaned the City of Culture Trust £1m which looks like it has been lost since they’ve gone into administration. That was a waste.
Although the administrator is indicating it is unlikely that the loan will be repaid, there can be no debate about the benefits the accolade and the Trust itself have brought to the city. Independent evaluation has proven the year was responsible for more than £180 million of additional investment flowing into the city secured at least in part due to the award of the UK CoC 2021 title. It also provided significant government funding to improve our heritage assets, attracted a £150 million boost in tourism income above pre-Covid levels and almost half of Coventry residents engaged with more than 700 City of Culture events. It is extremely regrettable and unfortunate if the loan is not repaid but the wider benefits to the city and its residents have been much bigger.
How do you know other councils are struggling with the same financial challenges then?
There are headlines nearly every day on councils that are facing financial challenges and having to make difficult choices. Every single case has a mixture of under-funding, a rise in demand for services and huge inflation pressures at its core. Responses to a recent FOI found that 369 of the 371 councils in England, Scotland and Wales say they were facing a collective £3.6bn hole in their finances for the coming financial year.