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Austen Shakespeare

North Tyneside Council faces budget deficit of more than £23m next year

North Tyneside Council is facing a budget deficit of more than £23m next year.

The local authority had already expected a £7m black hole this year but higher wages, inflation, energy costs, and social care fees, have created a further £15.6m gap. This comes from the council's initial budget proposals.

New council employee wages, which have been negotiated between the local authority and trade unions, will cost the council £4m. Council employees are set to receive a 5-6% pay rise, equating to approximately £1,925 per full-time worker.

Read More: Shocking report details desperate plight of Gateshead residents as councillors blame Government financial policy

Energy price inflation is set to cost the authority £4.7m. However, according to the council's own documents, "this area remains subject to significant volatility, so further updates will be given to Cabinet in future finance papers, both budget monitoring and budget setting."

This comes at a time when North Tyneside Council is attempting to provide 'warm welcomes' to residents to combat the cost of living crisis. Libraries and Customer First Centres across the area are now being used to help people keep warm and keep their energy bills down.

Social care fees are expected to eat up £1.2m from council coffers. This increase comes from negotiations between the council and social care providers. Back in March 2022, a report on home care provision in North Tyneside was delivered to the council.

The report found care providers throughout the area were struggling to retain staff due to low pay and a seeming lack of career progression. The council sought to address this by implementing higher rates for healthcare providers.

A £5.6m hole had been identified and attributed to the constant rise in general prices.

The council's report states: "It is highly likely that key income sources including Council Tax, through both the Collection Fund and tax base growth, and business rates will continue to be under significant pressure in 2022/23. The current Medium Term Financial Plan position incorporates prudent assumptions about these income streams, which will need to be reviewed over the course of the Budget-setting period".

The council's own calculations predict it could be possible to reduce the deficit with the aid of some windfalls. A predicted pension deficit in the council of £2.74m did not come to pass, so this could be carried through into next year.

The New Homes Bonus, given to local authorities in exchange for property development, is expected to remain at its current level, potentially bringing in £500,000.

A grant from central government, recognising the work of councils across the UK, is also expected to remain at current levels of funding, potentially saving the council £1.66m. At current rates, council tax will generate an additional £3.3m in funds. Any changes to council tax will be considered by the full council in February 2023.

In total, with these windfalls and more, the council could potentially reduce the deficit to £14.7m. However, the projections contain "inherent uncertainties".

Deputy Mayor Carl Johnson said: "There are tough times ahead, years of government cuts and the uncertainty caused by the pandemic have left us in a challenging position. Adult and children's social care are critically under-resourced at a time when demand is increasing significantly.

"We know how important our services are to people, and our budget plans will ensure there is no detrimental impact on frontline services or closures to our facilities. This report was written before the Autumn statement, however, even with the statement, we don't have a definitive picture of funding for the next year.

"Members and council officers are working to ensure we bring this year end on balance we have a good track record of doing so. However, we cannot be complacent and ignore that position while developing our financial plans for next year".

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