‘Tough’ decisions needed by Newcastle City Council to avoid bankruptcy

Due to austerity measures, the Labour-run council has already been forced to cut £369 million from its budgets since 2010. Credit: ITV Tyne Tees

'Tough' decisions are being made by Newcastle City Council to avoid it following other local authorities into effective bankruptcy.

Bosses in Newcastle say it is not at imminent risk of going under but plans to save another £15 million were signed off by the council's cabinet on Monday 19 February.

It will see households’ council tax bills across the city jump by the maximum 4.99% allowed, increased charges for parking and bins, and cuts to some crisis support teams.

Due to austerity measures, the Labour-run council has already been forced to cut £369 million from its budgets since 2010, but warns it must find another £60 million worth of savings by 2027. This is due to rising costs and surging demand for social care services.

Newcastle is not the first council to experience financial difficulties. Authorities like Birmingham and Nottingham have already had to issue section 114 notices, blocking any new spending commitments and effectively declaring bankruptcy.

Elswhere, Middlesbrough have asked for emergency funding from the Government to avoid doing the same.

Councils across England say they have a combined £4 billion funding gap to close over the next two years and ministers have been urged to intervene.

Councillor Paul Frew, the authority’s cabinet member for finance, said: “We are not in section 114 consideration. But we need to make decisions now so that we don’t get into that situation in the future.

“If we do not make savings then the budget gets closer to the line, then it gets riskier and riskier and at some point something will have to give. We have to make decisions up front now.

“We have a good record of that in Newcastle and are in a strong position. Our first consideration is always how we protect the most vulnerable – what the core services are that help them go about their days, help them out of crisis, and help them into an independent state of living. It is everything above that line that we then need to make tough decisions about.”

The council warns it must find another £60 million worth of savings by 2027. Credit: ITV News Tyne Tees

The council’s latest budget proposals include: 

  • A council tax rise of 4.99%, including a 2% precept towards the cost of adult social care, amounting to a yearly increase of between £63.85 and £191.55 depending on your house’s banding.

  • Ceasing the council’s crisis support service, which has a £100,000 annual provision to help people suffering emergencies through circumstances including domestic violence and financial abuse.

  • Cutting the budget of a supporting independence scheme, which provides access to basic items such as beds and cookers to people in poverty, from £457,000 to £100k.

  • Removal of an Intensive Family Intervention Team, which works with families whose children are at risk of being taken into care.

  • Reducing a subsidy for the city’s school meal service by £537,000 and charging schools an extra 50p per meal.

  • Higher charges for wheelie bins, garden waste collection, parking permits and car parking.

  • The loss of 40 council jobs, including 20 currently vacant posts.

The proposals are due to be given the final sign-off in March.

Proposals to cut the funding for Newcastle's homelessness prevention services by half were put on hold after a fierce reaction from charities and housing providers who warned cuts risked leaving vulnerable people to die on the streets.

While the homelessness budget is not expected to be cut in the next year, it will remain under review as the council seeks to redesign the service and is unsure what the services will look like in the future.

Cllr Frew also expressed concerns about the future of the Household Support Fund, fund established to help people with the was cost of living crisis.

Last year Newcastle received £5.8 million last year.

The scheme is due to run out at the end of March, but the councillor is concerned the authority will not be able to find ways to fund the extra help it has provided, which has included free meal vouchers during school holidays and benefit top-ups.

He said: “The council does not have money lying around to tackle those sorts of things. The Government has had this running for two years to address the cost of living crisis, which in large part they contributed to through the Liz Truss fiscal event.

"The idea that they are going to withdraw support at a time when inflation is still high and we are in a recession is really shocking. The Government needs to take responsibility and keep the scheme going.”

In response a government spokesperson said: "We announced an additional £600 million support package for councils, increasing their overall proposed funding for next year to £64.7 billion or 7.5% in cash terms. For Newcastle upon Tyne, the Core Spending Power increase next year is £23.4 million.

“We stand ready to speak to any council that has concerns about its ability to manage its finances or faces pressures it has not planned for.

"We have also invested over £2 billion in the Household Support Fund, with nearly £800 million already paid to families with children to help with the cost of living.”

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