Newcastle City Council plans in-year savings

Cabinet will meet next week (Monday Sept 14) to agree a series of proposals to balance the books with a warning the continued uncertainty around the pandemic and a shortfall in government support means there are more difficult decisions to be made in the years ahead.

A recruitment freeze, delaying or reducing spend on several projects and the potential use of unallocated reserves are all being considered to deal with the exceptional circumstances created by coronavirus.

This comes as a result of unprecedented pressure on local authorities across the country as they continue to support the most vulnerable residents, manage the easing of lockdown and deal with the wider social and economic consequences of COVID.

A  report published on 19 August 2020, by the Institute for Fiscal Studies highlights that “the public health and economic effects of the COVID-19 crisis are creating a perfect storm for councils’ finances, simultaneously increasing spending and reducing income.” They estimate that councils forecast spending pressures of £4.4 billion and non-Council Tax pressures of £2.8 billion – a combined 13% of pre-COVID expenditure.

Cllr Nick Forbes, Leader of the city council, says Cabinet is determined to balance the books without compulsory redundancies or impacting on frontline services but he warned unless the government delivers on its promises Newcastle, like councils throughout the country, will have to make yet more damaging cuts.

“Our staff have been in the frontline during this pandemic – working tirelessly throughout lockdown and supporting the city as measures are relaxed,” said Cllr Forbes. “They deserve our thanks and admiration and we will do all we can to protect their jobs.

“COVID has created a £64m hole in our finances and despite being told by the Prime Minister that all costs would be covered by government we have so far only received £22m and from what we understand we can anticipate around £6m more.

“It is wholly inadequate and I urge the government to address the issue in the forthcoming spending review. This emergency budget leaves us with no easy choices and while careful management has meant we are in a better place than some other authorities, it still leaves our finances in a perilous position.”

Among the measures being discussed by Cabinet are:

• Making one-off and short-term savings through corporate and treasury management items, capturing underspends against costs associated with items such as severances and contributions to the pension fund deficit that were set out in the medium-term plan;
• Implementing stricter recruitment controls with only the most essential vacancies being advertised and only then after a robust business case being approved;
• Reducing all other employee related expenditure that is not essential, including where possible reducing costs associated with overtime, agency staff and the use of professional services;
• Ceasing all non-essential expenditure on premises, including only carrying out repairs and maintenance related to health and safety, travel and transport, supplies and services, third party payments;
• Only proceeding expenditure using one-off resources, such as the airport dividend, where this is providing transformation capacity to achieve savings and / or support the recovery and renewal of the city, including the Net Zero Action Plan – wherever possible we will look to secure alternative funding sources to replace this expenditure; and
• Capturing our retained business rates growth through the business rates pilot we have jointly be part of with Northumberland County Council and North Tyneside as part of the North of Tyne Combined Authority.

Cllr Forbes warned a worrying number of recent job losses in the city, including the airport and retail sector, was almost certain to be exacerbated by further unemployment once the government’s furlough scheme comes to an end next month.

All avenues for alternative funding are being explored through the North of Tyne Combined Authority, the North East Local Enterprise Partnership and government departments amongst others but action is required to balance this year’s books.

Cllr Forbes said: “We  have been incredibly flexible, worked in different ways to respond to the crisis and learned many lessons but without more government support we are facing some real challenges not just in balancing the budget for this year but for the next few years having already cut £327m due to austerity in the last 10 years.

“We recognise the support government gave to employers and employers with the furlough scheme, we have delivered more than £61m in government grants to over 5,300 businesses and we have worked with partners to ensure the city could reopen and be as Covid-secure as possible,” said Cllr Forbes.

“But at almost every turn we have been left to pick up the pieces of government failure during this pandemic – from the fiasco of PPE leaving us to foot the bill to keep our staff safe, inadequate food parcels for our most vulnerable, to the haphazard approach to testing and tracing and the exams debacle – it has been local councils clearing up the mess.

“This virus has not gone away – there are real fears of a second wave as infection rates rise among young adults in particular. The threat of a no deal Brexit and the potential for further economic pain has not gone away. The urgent need to act on Climate Change and the benefits that can bring to health and wellbeing has not gone away.

“If the Prime Minister is serious about levelling up then we need to see evidence in the spending review, not just the bluster and spin we have seen thus far. Our communities need support, our businesses need support, our council needs support, our country needs support. It is time for the government to properly fund local government and work with us to deliver the support we all desperately need.”