We have begun consultation on finding another £90 million of savings - in addition to £330 million of Government funding reductions since 2010.
In total, it means the local authority will have lost nearly 70 percent of its Whitehall money between 2010 and 2020, more than any other city in the country.
Liverpool is more dependent on funding from the Government than other places because almost four out of five properties are in Council Tax Bands A and B, greatly reducing the city’s ability to raise its own money.
Council Tax only contributes 11 percent to Liverpool’s overall budget, leaving the city vulnerable to the Government’s austerity programme as Whitehall provides 72 percent of the overall funding for services.
Over the last three years, council departments have been asked to make savings of between 25 and 50 percent.
Closing the budget gap from 2017-2020 could mean taking another 10 percent from adults and children’s services which support the most vulnerable, and cutting all other departments by a further 50 percent.
Frequently asked questions
Why does Liverpool rely more on the Government for funding?
Liverpool City Council is funded in three main ways:
- Government funding – 72% of total
- Council Tax – 11% of total
- Business rates – 7% of total
- Other income – 10% 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.
In Liverpool, the vast majority of homes are in bands A and B - around 77% - in contrast with the English average, which is just 44%. This means other areas bring in much more of their overall budget in Council Tax.
Council tax keeps going up but services are being reduced – why is that?
Only 11% of our budget comes from council tax - far less than nearly every other council in the country. It means any increase brings in a relatively small amount. A one percent cut in Government funding costs us £3 million, whereas a one percent rise in council tax only brings in £1.4 million.
To put this into perspective, the total currently raised from council tax (£147 million) is less than we spend on adult social services (£151 million). The council has many more services and responsibilities beyond this one area.
How much are you considering raising council tax by?
The Government only allows councils to raise council tax by 3.99 percent. A rise of this amount in 2017/18 will bring in around £5.7 million in additional income, but we need to find £41 million of savings over the next year.
As part of the budget consultation, we are asking people how if they would be willing to pay up to 10 percent more - if it was ringfenced and used for adult and children’s services. We could only do this if people voted in favour in a referendum.
Every one percent rise in Council Tax costs an extra 18 pence per week for householders living in a Band A property (the majority of homes in the city)
What funding pressures are there?
Services for vulnerable children and adults are seeing increasing demand:
- Children in care up 18 percent since 2010
- Pupils with severe learning difficulties up 25 percent
- 50 percent increase in social care packages arranged each week at the Royal Liverpool Hospital
- 26 percent rise in people accessing homelessness services
- 30 percent rise in over 65s by 2026, most with at least one long term health need
- The introduction of the National Living Wage will cost £24.7m by 2019/20 in additional payments to social care providers
How is Invest to Earn helping the council?
‘Invest to Earn’ is the Mayor’s way of improving council finances long term, regenerating the city and making us less reliant on Government funding.
We fund projects which grow our economy, create more jobs, build strong businesses and make us a return to support services.
Since 2012, Invest to Earn has:
- Created and safeguarded 2,000 jobs and apprenticeships
- Attracted £150 million of external funding
- Delivered £3 million annually to support essential services
- The Cunard Building, which is generating up to £2 million per year in rent
- Kickstarting the regeneration of the derelict Stanley Dock, attracting £30m of private sector investment, creating 200 new jobs and making £800,000 in interest for the council
- Building the new Exhibition Centre Liverpool and Pullman Hotel, which is delivering over £500k in business rates and attracted 113,000 visitors in its first year
- Investing in Finch Farm Training Ground, which is delivering a net profit to the council of £200,000 a year
Why not use up your reserves?
In laymen’s terms, reserves are the City Council’s equivalent of your household savings account.
The city council currently has reserves of £66m (known as earmarked reserves) – but there are strict financial regulations on how we can spend this and much of the money is held for very specific purposes.
We also hold money prudently for insurance reserves, rather than paying out far more in insurance premiums, and hold money on behalf of schools which we can’t spend outselves.
Just £17.6m (4% of our net budget) is currently held as a general reserve for emergencies and unforeseen circumstances. The Government and financial regulators tell us to hold this money.
We are not allowed to use reserves to plug holes in the budget as once it is spent it is gone altogether – and if we did use our reserves it would only fund our services for only a matter of weeks.
We can only top reserves up by using our day to day funding or through providing for future obligations. Because the bulk of the money we have comes from the Government and this has been halved, we will have less opportunity to top up reserves in the future. This will make it even more difficult for the Council to plan financially for future liabilities.
Aren’t events and festivals making 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 on 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.
In 2015, the Three Queens attracted 1.2 million visitors into Liverpool City Region and independent research showed that they spent an additional £32.9m in the local economy.
What is the council doing to help people most in need?
In 2015/16 we spent:
- £12 million on services for people who find themselves homeless
- £3 million shielding 43,000 people from the full impact of Government reductions in council tax support
- £2.5 million on crisis payments to 12,000 people to help with the cost of food, fuel, clothing and furniture
- £2 million on Discretionary Housing Payments to 8,700 people affected by welfare reform and hardship
Although the council will do all it can to protect the most vulnerable, it is likely it will have to make reductions to funding in this area in future.