Budget factfile

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This factfile is updated regularly with data about Liverpool City Council’s budget, giving you an insight in to the challenges we face.

Funding

Liverpool City Council is funded in four main ways:

• Government funding — 60%  of total
• Council Tax — 14% of total
• Business rates — 15% of total
• Other income — 11% of total

Northern cities such as Liverpool, where there are higher levels of deprivation, traditionally received higher government grants to compensate for the fact that they have more homes in lower Council Tax bands and raise less income from local residents. Government funding cuts since 2010 removed this additional protection, meaning places like Liverpool are more badly hit as they are more dependent on Whitehall funding.

When adjusted for inflation, Liverpool City Council has £436 million less to spend per year now than it did in 2010, which equates to a 63 percent cut in its overall budget.

Each year, alongside the Local Government Finance Settlement, the Government publishes figures showing the spending power available to each local authority.

These Core Spending Power figures (previously Revenue Spending Power) include the main general government grants together with income from council tax and retained business rates.

The Government’s own figures show Liverpool’s Spending Power has reduced by a cumulative 21.3% in 2019/20 compared to 2010/11. The average reduction for all English authorities over this period was 10.2%.

Had Liverpool’s Spending Power been cut by “only” the average 12.3% then it would be £77 million better off in 2019/20.

This year we still have £19 million to save and next year we forecast we need to save a further £25 million.

We have lost more than 2,500 staff since 2010 and also cut senior management salaries and axed bonuses.

Where does the money go (2019/20)

Total net budget: £434 million

Including:

  • Adult Services and Health: £181 million
  • Children’s Services: £126 million
  • Community Services: £53 million
  • Regeneration: £38 million

Council tax base

Liverpool has been amongst the worst affected councils by cuts because historically it has been more reliant upon government grant because of its relatively low council tax base.

Reductions in government funding cannot be mitigated by growth in council tax income to the extent that it can in many other authorities. Hence, the higher than average cut in spending power.

A total of 60% of dwellings in Liverpool are in the lowest council tax band A. The average across England is 24%.

A total of 77% of dwellings in Liverpool are in bands A or B. The average across England is 44%.

A total of 90% of dwellings in Liverpool are in the lowest 3 bands (A to C).

The average across England is 66%.

The council tax base is also reduced by the number of dwellings qualifying for discounts and exemptions. The main exemption is for student-only dwellings and the main discount is for council tax support.

Liverpool’s tax base is reduced by almost 40% due to the impact of discounts and exemptions. The corresponding average reduction across England is 20%.

If Liverpool’s tax base was comprised of the same proportion of dwellings in each council tax band as the national average; and if Liverpool had the same proportion of dwellings qualifying for discounts and exemptions as the national average, then in 2019/20 Liverpool would be able to generate an additional £102 million in council tax income.

Liverpool Income if Average Spending Power Cut and Average Council Tax Base

Additional income if average cut in Spending Power since 2010/11 — £74M

Additional income if average Council Tax Base — £102M

Total potential additional income in 2019/20 — £176M

Equates to net budget for Adult Social Care in 2019/20 — £181M

Do events and festivals make large amounts of money for the council?

Not a penny of the economic spend generated through the city’s events and festivals programme comes to the city council.

But the economic impact to the city is vital to the continued growth of Liverpool. It is spent by visitors in our hotels, bars, shops and restaurants, helping support almost 50,000 jobs in the tourism sector across the city region.

It is really important to continue to attract visitors and business to the city — as this will help to create jobs and investment in the hospitality and tourism sector.

The city council puts these events on because they are vital to continuing to grow the economy and making sure that our residents have access to employment opportunities, as well as raising the city’s profile and attracting investment. Much of the cost is covered by external grants and sponsorship.

What is the council doing to help people most in need?

In 2018/19 we spent:

  • £12 million on support to help prevent people becoming homeless and assisting rough sleepers
  • Almost £3m this year on supporting people through the Citizens Support Scheme, compared with £2.7m in 2017/18.
  • Spending on the council’s Discretionary Housing Payments scheme, which supports people who have been impacted by Universal Credit and are struggling to pay their rent, has risen by more than 12 per cent over the past year, to £3m.
  • The council provides the most generous Council Tax relief programme in the Liverpool City Region, whereby low income families can claim up to a 91.5 per discount on their Council Tax. Around 41,600 working-age households benefit from this £3.5m scheme.
  • The council’s Benefit Maximisation team has helped residents to claim more than £10m in benefits they were entitled to.

What are the other options?

It is a stark economic environment, so the options are limited.

We have done as much salami slicing as we can and setting an unbalanced budget is not an option as we have a legal duty to balance the books.

Liverpool has £16.3 million in general cash reserves, which equates to under 4% of our net budget. Using our available reserves to pay for our services would mean we would run out of cash in a couple of weeks. Any other funds held in reserves are being held on behalf of other organisations (such as schools) and the council is legally not allowed to touch them, or they are already allocated to a project.

Budget pressures update presented to Cabinet

A report being considered by Cabinet on Friday 8 November shows Liverpool City Council is currently facing an overspend of £15.7 million this financial year – largely due to more children coming into care.

More than half of the overspend – £8.9 million – is due to pressures in children’s social care because of the increase in numbers and complexity of care packages for looked-after young people.

There has been an 11 percent rise in the number of children in care over the last year – up from 1,253 to 1,388 between September 2018 and September 2019.

The average weekly cost of a placement for the 134 children who are in residential care in Liverpool is £3,867 per week – with costs increasing due to a shortage of places nationally because of rising numbers of young people in care across the country.

Other significant pressures include:

• £1.9 million in community services
• £2.6 million in regeneration including a reduction in planning fee income
• £800k due to delays in delivering culture department budget savings
• £800k due to delays in reducing opening hours of the telephone Contact Centre

In addition, the report warns that council’s spending on welfare hardship funds is also facing “significant spending pressures”. Liverpool Citizen Support Scheme – which provides emergency payments to people in need – has seen an increase of 37 per cent in demand, meaning it has paid out £367,000 more than this time last year. There has also been a 14.5 per cent rise in demand for Discretionary Housing Payments to help households with rents, up £263,000 on the same period last year.

The council’s management team is working alongside the Mayor to reduce the overspend as much as possible as well as identifying the £57.6 million of savings that the council needs to between now and March 2020 to set a balanced a budget. This is on top of £436 million cut from the budget since 2010.

Invest to Earn

Liverpool City Council’s policy of investing in projects which make a return is generating millions of pounds to help offset the city’s budget challenge.

Examples of success include:

• 13,300 homes have been built or brought back into use since 2010, generating up to £16 million in additional council tax
• Giving the green light to Liverpool Shopping Park on Edge Lane and an extended Speke Retail Park, bringing in £11 million in business rates
• The Pullman Hotel at Exhibition Centre Liverpool has created 60 jobs and delivered £1.5 million in business rates since opening in 2016
• The sale of half of the city’s 20 per centre stake in Liverpool John Lennon Airport for a substantial return on our investment three years ago
• An additional 1,089 properties paying business rates since April 2018, bringing in £7 million in extra income

The money made from ‘Invest to Earn’ is ploughed back in to finding essential frontline services.