We write to you today as local government stands on the precipice of financial disaster.
We are sure you are fully briefed on the dire financial situation facing local authorities across England – but we would like to draw your attention to the devastating impact this will have on a well-run authority like Coventry City Council.
Despite many years of robust financial management, where we have taken difficult decisions to manage within budget, we are facing unprecedented times. Since 2010, we have received
£120m less each year – equivalent to real terms cut in core spending power of £678 per household between 2010-11 and 2023-24. This is a much bigger cut than the England average of £581.
Previous analysis has indicated that Coventry was amongst the 30 worst funded local authorities in the country in terms of core spending power, reflecting inaccuracies in data on which local authority grant allocations are based. Similarly, the most recent national data available (2019) shows that Coventry is just outside the most deprived quartile of local authorities in the country (81st out of 317 local authorities).
This year, and despite significant management actions to reduce spend, Coventry City Council still faces in-year pressures of c£12m, rising to a deficit of over £30m for the next financial year. This primarily reflects increased demand for adult and children’s social care, demand for housing, and wider inflationary pressures.
Unfortunately, the proposed one-off funding guarantee to ensure at least a 3% increase in core spending power is nowhere near sufficient to meet inflationary pressures and cope with the rise in social care costs. The escalating costs of placements – for children and adults – reflect a market that is broken, where local authorities are forced to cut other budgets to respond to this statutory demand. This position presents a clear and present danger to the ability of councils like Coventry to deliver their core functions.
The August 2023 report by the Institute of Fiscal Studies (How much public spending does each area receive?) points to the disparities of funding across the country, where Coventry is flagged
as an area that has been significantly underfunded across multiple public services. Comparing funding in the report for Coventry City Council with the assessed relative need, shows a shortfall of circa £50m.
We have always responded with prudent investments, robust management, innovation in service delivery – maintaining a balanced position in recent years. However, like others in the sector, we are now facing the prospect of having to issue a Section 114 because shortages in government funding mean we can no longer keep pace with demand.
Whilst we believe that this situation can only be mitigated by long-term funding reform, in the short-term we are calling on your department to assist. We would welcome a discussion on potential measures to help – which could include an income mitigation fund, top ups for under- funded authorities like ours, or fairer funding in relation to social care and housing. We would urge you to come and visit us in Coventry – so we can explain our situation more fully and elaborate on the catastrophic impact that our funding shortage will have on services for some of our most vulnerable residents.
Councillor George Duggins Councillor Richard Brown
Leader of Coventry City Council Cabinet Member for Strategic Finance & Resources