North East councils face crisis over new budgets

Nov 26 2010 by Adrian Pearson, The Journal

SEVERAL North East councils have warned the Government they may not be able to set a legal budget for next year as a result of spending cuts.

The fear has been sparked by the Government’s refusal to allow councils to borrow enough money to cover massive redundancy costs.

More than 5,000 redundancies have been announced across the region’s councils, police forces and fire bridges since the coalition Government came to power, with more to follow.

The budget threat, if carried out, could see the Government intervene and set a budget for the councils in order to ensure staff are still paid.

Because Ministers want the bad news out of the way before the next General Election councils have been told to rush through job losses, meaning many more people will lose their jobs than would be the case under more gradual cuts.

But the cost of this “frontloading”, running into several hundreds of millions of pounds, will have to come mainly from day to day revenue funds – the money behind bin collections and social care.

Last night the Local Government Association confirmed it had received representation from some North East councils, as well as others nationally, stressing concerns that without permission to fund redundancy costs through other means they risked not being able to set a legal budget.

City spending chiefs are believed to be concerned that they will not be able to balance the books without withdrawing services, some of which they are legally obliged to carry out.

A private assessment of the cutbacks made to council leaders in the North East revealed the impact is expected to range from “too damaging” to “undeliverable”.

When Newcastle Council reduced its workforce by 510 under the last Government, it had to find around £20m to meet redundancy costs.

Now it is feared councils already looking at cuts of up to £100m each will be forced to drop some services as they look to cover the cost of the changes.

South Tyneside council leader Iain Malcolm said he has had letters from the LGA confirming the budget worries, although he stressed his authority was not one of those caught up in the concerns.

He said: “If you take my council we are looking at 1,200 losses over the next four years, and we have been told we may not be able to meet the redundancy costs from the normal sources.

“So we are right to lobby the Government on this, because with cuts worth 30% alone we are clearly facing a major problem.”

It has been suggested that because various funding streams intended for disadvantaged Northern councils have been revoked the cuts could hit the region harder than Southern councils, who may actually see a budget increase in some cases. Lord Shipley, former leader of Newcastle Council, has said the removal of funds such as the Working Neighbourhoods Fund, worth more than £70m to the region, was a worry.

He added: “It is essential that when the local government funding settlement is announced in the next fortnight that due allowance is made for in the distribution for areas of deprivation. Otherwise there is a serious danger that councils in the North will lose out to councils in the South.” Asked about the budget worries by The Journal, shadow local government minister Caroline Flint said: “The LGA have clearly warned that as a result of the heavy front-loading of cuts to local councils as many as 140 000 people could lose their jobs next year, costing as much as £2 billion in redundancy payments – 10 times the Government’s estimate.

“These cuts go too far, too fast. The coalition has dumped their cuts on local councils up and down the country, without any thought to the impact.”