Government cuts will result in Liverpool City Council only having enough money left to run mandatory services such as social care within two years.
That is the stark warning laid out in a financial report to be considered by a special summit of the Mayor’s Cabinet on Friday 4 October, to which leaders of all political parties on the city council and local MPs have also been invited to.
The latest estimates show the city council has to save a further £156 million over the next three years, on top of the £173 million that has been cut in the past three years – a total of £329m in six years. This is an increase of £16 million on previous estimates, due to changes in funding arrangements recently announced by the Government.
Currently the council spends around 25 percent of its net budget of £550 million on items such as cultural events, regeneration and leisure centres, which are vital to Liverpool but which the council has no legal requirement to provide.
The scale of the financial challenge is such that, if the council does nothing, by 2016/17 all of this money will be required to fund the services the council is legally required to provide, such as adults and children’s social care, environmental health, refuse collection and street cleansing.
Mayor Joe Anderson said: “Staff across the city council have done an incredible job in the last three years managing the impact of the significant savings that we have needed to make.
“We are a much leaner, smaller and efficient council than we were, and have already had to make significant cuts to services and to the number of people we employ.
“But there is far worse to come and people need to understand that over the next few years we are going to be stopping doing things that we currently take for granted. If we do not, we will simply go bankrupt.
“Eighty pence in every pound of our income comes from Central Government, and because they have taken almost half of that funding away from us, we are going to have to make some very difficult and tough choices.
“Over the next few months I will be starting a discussion with residents, and our partners, about what they value the most, and what services they are prepared to see significantly reduced or withdrawn altogether.
“Although it will be painful, we have no alternative.”
The report also outlines that:
• The city council will be exposed to greater financial risk as it is now responsible for collecting £92 million of Business Rates at a time when income has flat lined and many companies are struggling
• Welfare reforms – particularly the Council Tax Support scheme – has significantly affected the collection of council tax. Around 45,000 working-age households face paying an extra £88 per year and some are struggling to pay.
• Only 10 percent of income comes from council tax and the government has effectively capped the level of that council tax at less than inflation, meaning it is not increasing with other cost of providing services
• The remaining 10 percent income comes from fees and charges from car parking, fines or planning or land searches where development activity has stalled due to the state of the economy.
The latest financial position shows the city council will have to save £45 million in 2014/15, £63 million in 2015/16 and £48 million in 2016/17.
Consultation is expected to begin shortly on the budget options for 2014/15.
FINANCE MYTHBUSTER
Why don’t you cut the number of staff and managers to save money?
The senior management team has been halved, saving £6 million per year. We have also reduced the size of our workforce by 1,600 through a voluntary severance scheme.
You’re owed millions of pounds in uncollected council tax. Why don’t you target non-payers?
Liverpool City Council’s Council Tax collection rate is as good as other large cities, at around 96 percent. However, unlike many other councils, we do not write off old arrears, which means that the amount of council tax debt that appears in the accounts is far higher than other councils. But any comparison is meaningless as they treat their debts differently and have written off any chance of recovering the money. Last year, the council brought in £8.5 million in historic council tax arrears and £381,000 of poll tax debt, which was then invested in services. This is money that the council would not otherwise have had.
Why don’t you dip into your reserves to cover the gap?
The city council has reserves of £115m, which will halve over the next three years as we pay bills such as legal claims and other committed future expenditure. Some of the reserves are held on behalf of other organisations, for example schools. Councils are not allowed to use reserves to plug holes in the budget as it is a one-off fix which just causes more problems in the future – once it is spent it is gone altogether.
You’ve recently announced that you’ve borrowed money to buy Everton FC’s training ground and a range of other buildings. Why do that if you’re cash strapped?
The council is not allowed to borrow money to pay for day to say services, but can do so if it is an investment that generates a return, such as rental or lease income. The revenue stream can then be ploughed back into providing essential services. The council will only invest in schemes when it is confident it will generate a return, and the risk is minimal.
