Newcastle City Council could be forced into huge emergency budget cuts of up to £32 million because of the devastating impact of Covid-19.
The pandemic has left a massive hole in the civic centre’s finances and urgent action is now needed to balance the books, local authority bosses believe.
The council says it could have to delay or cut spending on “several” unspecified projects and impose a recruitment freeze, but has stopped short of announcing redundancies or slashing vital frontline services.
Newcastle has received £22 million in government support for local councils during the pandemic – a figure that city Labour leader Nick Forbes branded “wholly inadequate” to cover its staggering costs.
Councils across the North East have repeatedly warned of the colossal financial impact of the global health crisis – which has left councils facing massive unexpected costs, huge income losses, and an inability to make other pre-planned cuts.
Coun Forbes said: “Our staff have been in the frontline during this pandemic – working tirelessly throughout lockdown and supporting the city as measures are relaxed.
“Covid has created a £64 million 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 £22 million and from what we understand we can anticipate around £6 million 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.”
According to a report to be presented to the council’s cabinet on September 14, the authority has already identified a £22.7 million shortfall – which could rise to a worst-case scenario £32 million amid the massive uncertainty that continues to surround the pandemic crisis.
It adds that the emergency cuts will offer only “temporary, not permanent solutions and savings”.
The immediate cost-saving measures will include reducing spend on overtime pay and outside agency staff, as well as ceasing all “non-essential” spending on council property.
The report adds: “We are still responding to the Covid-19 pandemic in exceptional circumstances and ongoing uncertainty. There remains the risk of a second spike and of national or local lockdown measures.
“Looking further ahead, we do not know what the outcome of the imminent Comprehensive Spending Review will be, nor the shape of the Brexit deal and how this will impact economically. We must therefore continue our cautious approach.”
Coun Forbes has also warned of an unemployment crisis that could hit the North East once the government’s furlough scheme comes to an end next month – on top of huge job losses already announced by airlines, shops, and other businesses across the region.
He 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.
“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.”
