Stormy days for Northumberland County Council

Nov 27 2008 by William Green, The Journal

NORTHUMBERLAND is facing the “perfect storm” economically amid warnings it will take years to get cash back from Icelandic banks.

Senior county councillor Derek Kennedy said Northumberland was facing pressures sparked by the credit crunch, £23m of taxpayers’ cash frozen in Icelandic banks, insufficient Government funding, development of a unitary authority and an outstanding £230m debt.

Coun Kennedy, the council’s assistant corporate services portfolio-holder, spoke out after a minister said local authorities were very uncertain about how much money would be recovered from Icelandic banks.

Local Government Minister John Healey also said affected town halls would not have to make any provision in their 2009-10 budgets for any possible losses as a result. In a statement to MPs, he said: “This will give them time to adjust their medium-term financial plans and be clearer about recovering their money before making decisions which affect their budgets or council tax.”

Mr Healey confirmed a previous announcement on a three-year funding settlement for councils and police authorities for next year, which he admitted was tight but fair and increased investment.

The region’s authorities are being handed £1.77m in 2009-10, a rise of 2.57% – the third lowest in England. And town halls nationally were told to make £1.5bn in savings annually, with details set out on council tax bills.

Speaking to The Journal, Coun Kennedy said: “It is just like the perfect storm. We are just getting everything thrown at us at the wrong time.

“We are trying to pull this council together and having all these problems nationally and internationally, and we are caught up in the situation.”

The Liberal Democrat also warned that the council may not get back £23m held with Icelandic banks, which could have a considerable impact on its finances.

He said: “I do think it will take some years for this to be cleared up with Iceland.

“I don’t think it will be cleared up next year. I think it will take several years even if we get the money piecemeal.”

Mr Kennedy also said the Government funding settlement did not recognise the size of Northumberland compared to its relatively sparse population.

Steve Stewart, chief executive of Northumberland County Council, said the council was part of a group of affected local authorities working hard to get the Icelandic money back and added that the situation was slightly more optimistic than it had been.

Speaking in the Commons, Tory local government spokesman Bob Neill said the funding announcement was bad news and claimed council tax bills would soar by 10.7% over the next two years.

For the Liberal Democrats, Julia Goldsworthy said any real-term funding increases had disappeared and many councils faced funding cuts.