Newcastle City Council in cash warning
Nov 25 2008 by Adrian Pearson, The Journal
LEADERS in Newcastle have hinted at council tax rises in a letter to Whitehall demanding help to close the biggest funding gap in the city’s history.
John Shipley has written a blunt letter to Local Government Minister John Healey setting out the £40m financial burden facing the authority.
Coun Shipley said the coming recession, coupled with higher energy costs, had lead to a funding gap of £20m. Added to this is an estimated downturn in council income of around £20m over the next three years.
The Government has been told that the authority had planned to restrain its council tax increase next year but that the credit crunch will now hit the council hard.
While Coun Shipley’s letter hints at the impact on council tax rates if the Government does not help, the city leader has promised rates will not rise above inflation.
His letter goes on to set out 12 measures which can be taken to avoid the funding shortfall.
Last night Coun Shipley told The Journal: “We are trying to be optimistic about this. We can work our way through this recession, but the situation has deteriorated far faster than anyone expected, and we are in a position much worse than even three months ago.
“We had worked out plans which would help us meet up to £14m of this shortfall but the problem now is that things are getting worse.
“We face the danger of real cuts in public services unless some of the measures in this letter are followed.”
The letter lists a variety of methods to ease the council burden. Many of these concern efficiency savings and the way in which central government funding is made available to councils.
But the authority is also requesting permission to borrow more money to pay for redundancies and to settle multi-million pound equal pay claims. It also wants a reduction in business rates and more recognition for the work carried out on housing and economic issues.
Whitehall civil servants have been told to make it easier for housing groups to secure funding to buy up empty properties.
Money for energy-saving schemes is also requested as Newcastle City Council struggles with a fuel bill already around £2m higher than budgeted.
Central to the measures suggested is an increases to the overall funding pot handed out to councils.
Newcastle treasurers believe the Government would never have decided on the lower-than-inflation increase if they knew when they awarded the cash last year just how bad the economy was going to get.
Labour opposition leader Nick Forbes said the letter provided the council “has no control over its spending”.
He said: “They have jumped on the bandwagon of asking the Government to bail them out because they do not know what they are doing.
“They have failed to demonstrate any prudent financial management and no doubt we now have to look at the tax payer to bail out the city council.”
Coun Shipley said he would meet his manifesto commitment to not raise council tax above the rate of inflation.
There was no comment from the Department for Local Government.
