City council warns it may have to issue section 114 notice in letter pleading for financial support

Coventry City Council has pleaded for financial assistance from the Government in an open letter to the Secretary of State for Levelling Up, Michael Gove, warning that local government “stands on the precipice of financial disaster”.

Revealing that the local authority faces having to issue a s114 notice, Coventry's leader, Cllr George Duggins, and its cabinet member for Strategic Finance & Resources, Cllr Richard Brown, who authored the letter, said the council’s precarious financial position comes "despite many years of robust financial management".

Coventry currently faces in-year pressures of around £13m, rising to a deficit of more than £30m for the next financial year.

Its financial pressures mainly stem from increased demand for adult and children's social care, demand for housing, and wider inflationary issues.

The local authority is also underfunded in comparison to other councils, the letter argues.

The letter reads: "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."

It argues that previous analysis has also 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)."

Coventry received a proposed one-off funding guarantee to ensure at least a 3% increase in core spending power, but this is "nowhere near sufficient to meet inflationary pressures and cope with the rise in social care costs," the council argues.

The letter notes: "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."

It continues: "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.”

The letter adds: "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."

Coventry's warning comes as research from BBC News revealed that UK councils have a collective £5.2bn budget 'black hole'.

The research suggested that the average upper-tier council faces a £33m predicted deficit by 2025-26 - up from £20m two years ago.

The Department for Levelling Up, Housing and Communities has been approached for comment.

Adam Carey