Spending spree unveiled to ward off recession
Jan 7 2009 by Adrian Pearson, The Journal
Budget warnings
WARNINGS of a “challenging” budget for the next year in the wake of economic turmoil and falling interest rates for savings, have been issued by council chiefs.
The Local Government Association said finding savings was the key to delivering a balanced budget following a three-year funding settlement with Whitehall.
In evidence to MPs, it added: “In 2006-7 councils generated £11.5bn of income from fees and charges in comparison with £22.5bn from council tax. The economic slowdown is affecting authorities as they face sharply lower income from fees and charges, creating unexpected pressures in the current year - as well as the coming one.”
The LGA also said English councils generated £1.4bn in interest on their deposits in 2006-07, representing a return of about 4.8%. This is expected to be “substantially lower” in the 2009-10 financial year.
Icelandic crash could lead to cuts
STARK warnings about service cuts and redundancies or higher council tax have been raised by county council chiefs following the Icelandic banks crisis.
The warning to MPs from the Society of County Treasurers comes as £23m of taxpayers’ cash deposited by Northumberland council bosses in Icelandic banks remains stuck – with no certainty about when any money may be returned.
The society, whose members include Northumberland, has told the Commons Communities and Local Government committee that affected councils – who have around £1bn stuck in Icelandic banks – will have to ultimately balance their books if losses occur.
And that could mean higher council tax or less service delivery, according to evidence submitted to the committee investigating local authority investments.
“Inevitably if there is less service delivered it is likely this will lead to reductions in head count for authorities but it will depend on the individual authorities’ position as to whether this can be dealt with in natural wastage or would lead to redundancies,” the society said.
The Local Government Association also told the Commons committee some authorities with more substantial at risk deposits faced “significant difficulties” – and will need to plan and consult on potentially significant service changes.
Blyth Valley Labour MP Ronnie Campbell said the ongoing situation with the failed Icelandic banks risked making planned cuts as part of a switch to a new unitary authority in the county even worse. “It is a big worry that they are going to lose this £23m and there could be more service cuts and redundancies,” he said.
He also accused county council chiefs of ignoring warnings about Iceland’s financial institutions – although Northumberland council leader Jeff Reid denied that any unreasonable risks had been taken.
Mr Reid added: “We are facing substantial difficulties already because of the local government reorganisation and the efficiency savings put upon us. That is the big problem. The Icelandic money, although it is going to be missed, I think we are going to be able to get around it this year. Eventually we will get it back.”
