Council equal pay bill set to raise council tax

Oct 2 2008 by Adrian Pearson, The Journal

TAXPAYERS could face years of higher taxes as the region was landed with a £150m equal pay bill.

Local authorities are bracing themselves for a big hit on their multi-million pound reserves – the interest from which is vital to keep council tax down.

And with some of the liabilities faced by the councils dwarfing their cash pots, money direct from taxpayers could be required to pay the bill.

Other unpalatable options in front of moneymen are selling off land and buildings or going into debt – North Tyneside has already been given the right to borrow £15m.

The Government has now offered councils the chance to sell assets such as land or buildings to raise money, or enter into yet more debt to pay off the claims.

Many North East authorities have already been forced to pay compensation to women employees previously made to accept lower wages than male counterparts.

Northumberland Council alone faces an overall bill of up to £50m.

If it loses ongoing legal action it will have to wipe out its reserves of £27m and would see capital projects such as new road building grind to a halt.

And city leaders know if ongoing legal action goes against them they will have to look at increasing future council tax rates and cutting services.

The Local Government Association said it had no way of predicting how bad the final impact on finances will be.

A spokesman for the association said that planning for the worst case scenario would mean officers considering an “extremely harmful” impact on budgets and could not say how long it would take councils to recover from the blow.

Durham County Council has set aside £28m, a figure slightly higher than the £20m on average expected to be paid out in compensation and legal costs by the five Tyne and Wear authorities.

North Tyneside Council was one of the councils given permission to borrow up to £15m last week, but the total cost to the council of settling pay claims is likely to be much higher.

The council’s accounts already show finance bosses have set aside £6.5m for equal pay costs this year and are having to maintain a multi-million pound emergency reserve for future payments.

Finance officers at North Tyneside are believed to be “very reluctant” to hand over exact figures for fear of opening the door to future claims.

Newcastle city treasurer Paul Woods said his council had not applied for Government borrowing permission this year but he “will apply for capitalisation in 2009-10”. The council has already paid out £16m and expects the final bill to be much higher.

In Gateshead councillors had thought they were out of danger after paying out £8m and accepting some blame. But recent equal pay court cases and tribunals have brought up the threat of yet more legal action.

Councillors have been warned their entire budget could be “destabilised” if court cases go against them.

Sunderland Council is facing a large number of claims and has transferred £6m in just one year to add to a growing contingency fund in order to cover “unpredictable” court cases.

The authority has already paid out nearly £10m and its most recent accounts warned of a “significant financial impact” if it loses upcoming court cases.

City treasurer Keith Beardmore said the authority was “mounting a strenuous defence” of the claims made and had already settled many earlier claims. A South Tyneside Council spokesman said: “The council has made provision to meet the potential equal pay and equal value financial liability of £19.6m by negotiating with a local solicitor and trade unions.”