A North East council expects its cost pressures to skyrocket by more than £30m next year as local authorities battle a crippling inflation crisis.
Dire financial forecasts reveal that Newcastle City Council bosses are facing at least £30.9m worth of extra pressure on the civic centre coffers, due to factors including rising energy bills, contract inflation, and staff pay rises.
A dire briefing due to be presented to Labour councillors on Wednesday evening, a copy of which has been seen by the Local Democracy Reporting Service, states that some of the escalating bills will be offset by improved resources generated by grants, council tax, and business rates. But the city council is, at this stage, still facing a major budget deficit of £22.2m for the 2023/24 financial year.
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And Mark Nicholson, the council’s chief finance officer, warned that the situation could get even worse with energy costs “very volatile and likely to increase further” and every one of the authority’s long-term contracts set to be “significantly” more expensive than planned because they are linked to inflation. Measures to deal with the cash crisis, such as any potential council tax rises, job cuts, or frontline service reductions, are expected to be announced in November.
In the current 2022/23 financial year, meanwhile, the council is expecting to overspend its budget by £6.2m – even after spending £8.3m of reserves to offset “Covid scarring" on services including social care and car parking. Newcastle is far from alone in facing a gloomy financial situation, with authorities across the region needing to find tens of millions of pounds to balance their books and having issued urgent pleas for help from the government to deal with the financial emergency.
The authority's cabinet member for finance, Paul Frew, said: “Like the rest of the country, the council is facing significant increases to our costs. In the current year we are facing an additional £6.2m of cost pressures. We are in early stages of our planning of the years ahead which will be challenging, however we are confident that we will deliver
“Paying those who deliver our services enough to live on during the cost of living crisis is an essential responsibility. Despite current inflation we are yet to see serious support from the government for our core costs.”
Last week, it emerged that Northumberland County Council had offered all of its staff the chance to apply for voluntary redundancy, with the authority currently predicting that it will overspend its budget for this year by £12m.
Durham County Council has warned it will need to dip into its cash reserves to help cover an overspend of £19.2m. And a report to North Tyneside Council’s cabinet on Wednesday night confirms that bosses there are facing up to an in-year deficit of almost £11m.
Jon Ritchie, director of resources at North Tyneside Council, said: “North Tyneside, like many councils across the region, are facing stark financial pressures, some of this is a result of the cost-of-living crisis, rising energy prices, inflation and recovery costs following the Covid-19 pandemic. This has created an in-year pressure of £10.963m which we are currently working to address.
“Going forward we will create robust short, medium and long term financial plans in line with Government announcements and factoring in the wider national and international context. Not knowing the exact level of funding we receive makes this planning difficult but we use a detailed financial modelling system that helps us predict possible scenarios.
“To help plug this funding gap we are reviewing our approach to digital communications and services, how we develop our workforce and organise our teams, the way we commission contracts and work with our supply change and managing our assets. I would encourage all residents to engage with the consultation process when it launches in Autumn.”
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