In an open letter to Chancellor of the Exchequer, Cllr Craig sets out the financial pressures facing the Council - and the wider local government sector - and urges measures to address them:
6 November 2023
As you prepare for the Autumn Statement later this month, I’m writing to explain Manchester City Council’s current budget position and implore you to consider urgent measures to ensure that our funding is sufficient, sustainable and strategic.
In your recent visit to Manchester for the Conservative Party Conference you will have encountered a confident, ambitious, forward-looking and vibrant place. But what might not have been so immediately apparent is that this is also a city where we are continuing to grapple with long-term structural inequalities and some of the highest levels of deprivation in the country.
We are working hard to build a fairer city where everyone can share in success but in the face of significant pressures on our budget, on top of more than a decade of funding cuts since 2010, it is becoming increasingly impossible to make ends meet.
Government funding cuts and unfunded pressures such as inflation and population growth have let us having to find £443 million of savings since 2010. Councils as a whole have seen their average spending power reduced by more than a quarter in this period in real terms - but those with higher levels of deprivation have been disproportionately affected and we have been among the hardest hit places in the country. If Manchester City Council had received even the average cut we would be £70 million a year better off.
You can hardly fail to have heard the dire pronouncements from councils across the country that local government funding is current neither sufficient nor sustainable. The Local Government Association has warned that councils in England will face a £4 billion budget shortfall by March 2025. Many councils have either issued section 114 notices – effectively declaring themselves bankrupt – or warned that they may have to at some point. No responsible government can afford to ignore such alarm signals.
While careful planning means we are still in a position to set a balanced budget for 2024/25 this has required the use of £53.5 million reserves and around £38 million of savings for the period 2023/24-2025/26. What’s more, long-term funding cuts and the one-off use of reserves have eroded our resilience.
Right now we face a whole raft of pressures.
Inflation is of course a major factor which was not fully accounted for in our Government funding. Even if this continues to decrease, inflation is still at a much higher level than anticipated and there will be a lag before we feel the benefits. Many contracts, for example, are updated based on inflation over the previous 12 months. The cost of inflation is now £21m a year compared with £8m a year pre-pandemic.
Demand continues to increase for long-term care arrangements in Adult Social Care, both for older people and those with learning and physical disabilities. This will cost an extra £7.2 million in 2024/25.
Increased Children’s Services costs, which relate mainly to higher prices for supporting children and young people in residential and supported accommodation, account for another £6.5m of pressures.
Home to School Transport costs for children with special educational needs and disabilities (SEND) are another growing pressure due to a growth in the number of children requiring it. This will cost an estimated additional £1.3 million extra a year over the next three years.
While we have been working to contain homelessness costs, they also remain a constant pressure in the face of the cost-of-living crisis and the ongoing freeze to Local Housing Allowance (LHA). As the cost of accommodation increases, and the proportion of it we can use LHA to cover decreases, we are having to spend more to plug the gap.
Government migration policy, including the rapid closure of asylum hotels, is also contributing to our costs. We have £2.5 million in unfunded costs associated with looking after unaccompanied asylum seeker children for 2024/25.
We need funding to be sufficient, sustainable and strategic.
Our funding needs to reflect current and future demand for essential services and recognise that current resource levels are inadequate. It also needs to reflect that there is more demand for services, and greater costs, in areas such as Manchester where there is greater deprivation.
It is imperative that councils are given multi-year funding – rather than sticking plaster short term finance settlements as is the case at the moment. This enables greater certainty and improved planning - for example around prevention to bring down cost pressures around social care, homelessness and other areas rather than endlessly reacting to them. We also need to reduce the confusing array of fragmentary funding pots and the plethora of time-consuming bidding processes which force cash-strapped councils to compete for resources.
We need our funding to be strategic. For all the challenges I’ve outlined we are proud of our track record. We’re delivering new homes, including 10,000 affordable homes over a decade. We’re regenerating derelict sites and breathing new life into neighbourhoods. Our Making Manchester Fairer action plan is addressing inequalities in the city and tackling interconnected issues such as poverty and health.
But a lack of stability through long-term funding has constrained the scope for our own strategies to reach their full-potential, and for us to use our place leadership role to support government agendas around housing growth, regeneration and climate change. Imagine how much more we could achieve if we were fairly funded.
You have an opportunity in the Autumn Statement to recognise the crucial role which local government plays in places such as Manchester. I urge you not to waste it.
Cllr Bev Craig
Leader of Manchester City Council