Bankruptcy concern for Coventry Council
It's claimed it could happen next year, if there's no extra funding
Coventry libraries, parks and leisure centres could all be hit if the council has to effectively declare itself bankrupt next year.
The council will avoid the move – known as a Section 114 notice – this year but could have to do this in 2024 if it doesn’t get extra government funding, according to senior councillor, Richard Brown.
Now council leader, George Duggins, has revealed the problem comes from long-term government underfunding and the recent surge in inflation.
He strongly denied any suggestion council budgets had been mismanaged and stressed that other councils across the UK are in the same boat.
Asked by the Local Democracy Reporting Service how the Section 114 notice would affect Coventry residents, he said it could mean the council only provides statutory services, meaning those it has to under law.
“If we were to only provide statutory services then there would be real sort of doubts about the work that we could do with respect to parks, libraries, community centres – they’re three examples,” he said.
“All 114 notices would be different in respect to what the recovery plans are but really what it would mean is our statutory services would be what we have to provide.
“That would be social care, children’s services, adult care, things like that, refuse collection.
“And some of the things that you associate and people enjoy like libraries and like parks and leisure centres and community centres, might not be there.”
Asked if these types of services might be cut, he said: “Well those kinds of services might not simply exist.”
“I want to ensure that people understand rather than worry about it,” he added.
“We’re doing everything we can.”
“We are not alone in this – this is the point. This isn’t unique to Coventry. This is across the country.”
Cllr Duggins explained the council is facing a £12 million shortfall this year and a £20 million gap next year.
“We will look to reduce both of those figures but the council has over the years been chronically underfunded,” he said.
“We are one of the 20 authorities whose core funding is amongst the lowest.”
Using reserves to plug the gap would be “very difficult” and only work for two years, he said.
Equal pay claims which have been made against the council over the past year are not part of the shortfall it faces, Cllr Duggins also confirmed.
That issue is one of the core reasons Birmingham City Council faces effective bankruptcy.
“The equal pay claims will be dealt with completely separately,” he said.
“At the moment we don’t know what the magnitude of the equal pay claims is likely to be.
“But once we get that figure we will have a plan which will deal with it.
“Basically that will be a one-off issue and not a revenue issue.”
Cllr Duggins said he would “totally reject” any criticism that the council has mishandled budgets.
“That notion is I’m afraid to say is a nonsense,” he said.
“I totally reject it, I wouldn’t even concede it. I know the work that goes in to prepare our budget each year.
“There’s no question that this authority is a robust, professional authority.”
He added: “I would go to the other side of the coin and say to be perfectly honest I am amazed that we’ve managed to do what we’ve been able to do over the years with the scarcity of finance that we’ve had.”
On why the council is facing the problem, he said it was a combination of long term underfunding and recent pressures.
“Coventry has been disproportionately affected per head of population which I think has been around £70 per head of population – more affected than the average authority,” he claimed.
“Then on top of that we’ve had, as everybody else had, massive inflationary problems.
“And there’s never been any compensation allowed or not sufficient compensation allowed for those inflationary trends.”
“Because the thing is this inflation is baked in, when people talk about cutting inflation it’s not making any in-roads into the inflation that was already there,” he added.
The Labour leader said there is a “chronic underfunding of local government that needs to be addressed,” citing an overall £3 billion gap councils face.
“I think what is most galling is that Michael Gove recently sent £1.9 billion back to the treasury.
“That £1.9 billion wouldn’t solve the problem, I accept it would be resource for 1 year, but it would probably get local government over the line for another year.”
He said that he and Cabinet Member for Finance Richard Brown identified the problem in May and decided they needed to share the information with other authorities.
The pair are also keen to make the public understands the problem, he said.
They have written a letter to Michael Gove outlining the issue and would welcome talks, but have had no offer of them.
Cllr Duggins said the government need to talk to councils “as a collective” due to the big funding gap faced.