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Bradford
Monday, June 17, 2024

Cost of living crisis hits councils

North East councils have warned of “unprecedented and unavoidable” cash shortfalls set to total tens of millions of pounds as the cost of living crisis bites.

Just as households across the region are grappling with rising inflation and escalating energy bills, local authorities have warned that they too are faced with a deepening financial black hole that could force cuts to frontline public services.

Multiple councils have warned that they will have to make “difficult” decisions to try and balance the books, having already been forced to slash their budgets dramatically over the last decade.

Inflation in the UK has risen above 10% for the first time in 40 years this week, while the energy price cap is set to rise substantially over the coming months.

The Local Democracy Reporting Service asked councils in Tyne and Wear, County Durham, and Northumberland to outline what extra money pressures they were facing due to the cost of living crisis and what measures were planned to deal with any budget deficits.

Durham County Council has reported that its financial forecasts have “deteriorated further” since warning just last month that almost £22m of savings would need to be found in 2023/24 and £55m over the next four years.

Deputy council leader Richard Bell said: “We will be reviewing our medium term financial forecasts again in the weeks ahead and while our focus has always been on protecting frontline services, it is inevitable that difficult decisions will have to be made at some stage if additional government funding is not forthcoming.

“I will be writing to the new Prime Minister to highlight the significant financial strain on the council and the wider sector and calling on the government to increase funding next year in recognition of the unprecedented and unavoidable cost pressures we are facing.”

Sunderland City Council predicted in July that inflationary cost pressures would cause a budget overspend this year of almost £4m.

Officials in Newcastle currently estimate that rising energy bills alone will add £1.2m to the council’s bills – while factors such as staff pay rises, increased contract prices for services such as waste disposal, and rising private finance initiative (PFI) costs are expected to put substantially greater strain on the civic centre coffers.

Cllr Paul Frew, Newcastle City Council’s cabinet member responsible for finance, said: “Were Government serious about addressing this crisis, they would be providing additional resources for staff to have a decent pay rise.

“The council is doing all that it can to mitigate the effects of the cost of living emergency on our residents but we are also faced with rising cost pressures and it is ultimately up to Government to make more resources available so councils can support their communities, especially the most vulnerable, in these very tough times.”

Northumberland County Council confirmed it had already set aside £5.2m this year to deal with issues such as rising fuel and utility costs, but the Tory-run authority’s deputy leader Richard Wearmounth said that “we anticipate that further difficult financial decisions will need to be made going forward as costs continue to increase”.

He added: “We are working hard to ensure that these pressures impact as little as possible on our frontline services for residents and further details will be reported to Cabinet in September.”

Gateshead Council declined to comment, while North Tyneside and South Tyneside’s authorities did not provide specific numbers on how the cost of living crisis is set to impact them.

North Tyneside councillor Martin Rankin said the economic crisis was “creating further strain on our already impacted budgets” and was made worse by not knowing what level of funding councils would receive from the government next year.

South Tyneside Council’s lead member for finance, Joanne Bell, added: “There is no doubt that difficult financial decisions will need to be made going forward and escalating costs in various areas are already putting some immediate pressure upon this year’s budget.  The implications will be worked through as part of the Medium Term Financial Plan.”

A Government spokesperson said: “We are working with councils to understand the impact inflation will have on their budgets and stand ready to speak to any council that has concerns.

“Councils in the North East will have access to an additional £210 million this year, with a total spending power of over £2 billion.”

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