Spending spree unveiled to ward off recession

Jan 7 2009 by Adrian Pearson, The Journal

A £21m spending spree in a bid to beat the recession is to be funded by a 2.9% council tax increase.

Newcastle city council chiefs have revealed plans to use the tax rise to fund a three-year spending plan which sees the council borrow cash to invest in city homes and businesses.

The council intends to borrow while interest rates are at an historic low and will then use council tax to pay back the loan. Had council chiefs decided against the spending spree the council tax rise would have been just 1.7%.

The news comes in stark contrast to the warning from Northumberland’s new unitary authority that council tax will have to rise as by as much as 5% to cover the cost of meeting Government-ordered savings.

Opposition politicians last night criticised the council for introducing any rise, arguing the time was right for a cut in local taxes.

Councillors are set to back the spending plans despite the council facing a £20m funding problem which will see more than 500 redundancies in order to keep bills down.

Council leader John Shipley told The Journal he was not prepared to sit back and watch as the recession takes hold.

Mr Shipley said: “We believe we have a responsibility not just to keep to our election promise of keep tax rises at or below inflation but to do everything we can to help the city through these times.

“As a responsible authority we have to act for the good of the city in the face of the recession and that means investing in the future.

“I think residents will be prepared to accept this council tax rate and the balanced budget we aim to bring in exchange for this level of investment.”

Mr Shipley went on to insist his council’s efficiency savings and the job losses needed to meet them would not impact on services.

“We will not cut frontline services because that will hit people even harder“, he said.

Councillors are expected to agree the budget despite receiving one of England’s lowest hand-outs in Government cash.

Newcastle will get an increase in its overall Government funding of just 1.7%, a level of funding which Mr Shipley has previously blamed for the council facing the biggest funding crisis in its history.

Newcastle Central MP Jim Cousins said the Liberal Democrats had missed the opportunity to make “a real change for the better”.

He said: “I’m not at all convinced by this, because what would actually make a real difference in the city is a freeze in council tax rates or even a cut.

“This would be the right year to do this, and it would have huge symbolic value and would help attract people to the city at a time when we need to do all we can to help ease household costs.

“A better way to stimulate the economy here in Newcastle is get more cash into people’s pockets and not tax them even more during a difficult time.”

Newcastle council opposition leader Nick Forbes has also backed calls for residents to be given more help during a recession, arguing that tax payers were better “in a better position than the council when it comes to deciding how to spend their money”.

Mr Forbes said: “At this stage I can see no justification for an increase in council tax. Nothing the council can do would have as big an impact as a freeze in council tax.

“What the Liberals are not saying is that they need to raise tax because they have let spending get out of hand. If you look at consultancy costs alone they have risen out of all proportion and no one there wants to take responsibility for this.”

The full budget will need to be agreed at a full council meeting later this year.

Economic stimulus