By Herbert Soden LDRS
Gateshead Council has warned it faces an £18.6m black hole in the next financial year.
The bleak picture was outlined in a report which referred to figures from the council’s medium term financial strategy.
It also estimated that over the next five years the borough is facing a funding gap of £58.4m.
The document stated that the coronavirus pandemic would cost the council in the region of £50m, and that its impact would be felt for years to come.
It said: “The financial impact to the council of reduced income and increased costs attributed to Covid-19 is considered to be circa £50m.
“The pandemic has had a substantial financial impact on the council’s in year position which will also have impacts in future years.”
It also warned that the impact on the local area from Brexit, unemployment and recession “are yet to be ascertained”.
To tackle this the local authority said it is rethinking its spending plans.
The report added: “The council has taken steps to close the financial gap in year by pausing and reprofiling areas of planned investment.
“This is in response to the Covid-19 impact itself and the requirement to manage the impact on council finances. Activity will be reconsidered as part of budget setting.”
The report revealed a new budget setting process would be introduced, which see the authority carry out a “fundamental review” of its capital investment programme.
The council’s cabinet voted to approve on this plan on Tuesday.
Council leader Martin Gannon said part of next year’s funding gap could be filled by increasing council tax.
Last month Chancellor Rishi Sunak invited councils to impose inflation-busting 5% increases in council tax bills next year.
If this happens it means bills can increase by £91 for a band D home in Gateshead, up to £1,915-a-year.
Councils are barred by the Government from setting the basic council tax increase at more than 2%.
If they want to increase bills further, they need to hold a referendum of local voters, which they would be almost certain to lose.
But Mr Sunak has also told councils that they can impose an additional 3% increase with the money ring-fenced for social care, without requiring a referendum. It means they can hike up bills by 5% in total.
Gateshead Council has not yet drawn up its budget proposals so it is not yet known whether this will happen.
Coun Gannon said:”The gap is £18.6m. If we follow the logic of Government we can put council tax up by 2% and take the full adult social care precept of 3%.
“This shifts the burden to the people of Gateshead but we’re still left with a gap of £7m – none of these decisions are easy.
“70% of our budget is spent on adult social care packages and fixed costs like servicing debt, there is very little else left. We have nothing else to cut.”
Coun Catherine Donavon, who represents Lobley Hill and Bensham, added: “At the very time residents need our help services have been stopped.
“After 10 years of austerity in the name of ‘living within our means’ this is the cost of it.
“It’s very clear in my area and Bensham that people are living below acceptable income.
“I’m not talking about poverty, people are destitute.”