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Consultation on our Budget closed on 1 February 2013. All the responses we received have been passed to the relevant service area for consideration. A report detailing all of the responses to consultation will be written and provided to politicians who ultimately make the decision on the Budget at City Council on March 6 2013. A copy of this report will be published on our website, with all our other budget papers on 26 February 2013.
Why does the council have to make £90m savings?
We must find savings of £90m over the next three years - that's a third of our current annual budget. These savings are necessary because of a combination of reductions in government grants and rising cost pressures. The government must reduce public spending to address the financial deficit - but the cuts to local government have been much higher than those experienced in other parts of the public sector. The cuts to hard pressed places like Newcastle have been greatest of all because of the cuts to grants targeted at reducing deprivation. These cuts come on top of spending reductions which have seen us save £100m over the last three years.
Why is Newcastle City Council facing such severe cuts when other councils in the north east or other cities don't seem to have such problems?
We must find savings of £90m over the next three years - that's a third of our current annual budget. These savings are necessary because of a combination of reductions in government grants and rising cost pressures. The government must reduce public spending to address the financial deficit - but the cuts to local government have been much higher than those experienced in other parts of the public sector. The cuts to hard pressed places like Newcastle have been greatest of all because of cuts to grants targeted at reducing deprivation. These cuts come on top of spending reductions which have seen us save £100m over the last three years.
We have chosen to be open and honest about the scale of the cuts. We have recognised that longer term radical solutions are required and that it will not be possible to shave spending year on year. So, unlike many other councils, we are setting a three year budget, exposing the full impact of public spending cuts between now and 2016. This will help to take a genuinely radical and transformative approach. We believe this is the best way to ensure that core local services remain affordable and sustainable into the future.
You say that government cuts have treated Newcastle unfairly what do you mean?
The reduction in government grants to Newcastle means the loss in council spending power is worth £158.20 for every person in the city. The average reduction per head of population is £79.38 per person, which means the cuts for Newcastle is much worse than the national average. Some better off parts of the country like Basingstoke have suffered government funding cuts of just 18p per person.
The main reason for these big differences is that in the past hard pressed places like Newcastle have received extra government grants targeted at tackling poverty and deprivation. These grants have been targeted for the biggest cuts - so places with high levels of deprivation like northern cities and inner London boroughs have been worst hit by the government's spending reductions.
It is still true to say that Newcastle receives more government funding than better off areas but Newcastle's funding has dropped dramatically, whilst budgets in better off areas have seen little change.
The biggest part of your budget shortfall appears to be your own cost pressures not government cuts why don't you sort these things out before making cuts to services?
Around £30m of our budget shortfall is a direct result of reductions in government grant funding. The remaining £60m is a result of unavoidable cost pressures that we have to absorb. We have worked very hard over recent years to deal with cost pressures by making efficiencies and reducing the running costs of the council. However there are some rising costs which cannot be avoided.
These include things like rising costs caused by inflation. Just like any other household or business we must buy goods and services and pay for things like heating and electricity. These costs are rising whilst the funding is falling.
Changes to Newcastle's population are also having a big impact on our costs. It's great news that people are living longer, but an ageing population means that more and more people rely on us for the care and support they need to live independently into old age. The rising cost of adult social care is a big pressure for all councils and the government has yet to identify a solution.
The economic downturn is having a big impact on the level of income we are able to raise from the goods and services it provides. For example income from city centre car parks has fallen dramatically as fewer people drive into the city centre.
One of the ways we will save money is reduce the number of people we employ. Unfortunately a large number of staff will leave the organisation and we have had to set aside £5.2m to meet redundancy costs
Why doesn't the council put up council tax so it can afford to keep services going?
We have decided that it would be wrong to increase the cost of council tax at a time when so many people in the city are struggling with their own financial pressures. There will be no council tax rises in April 2013. The government has made some funding available to help councils keep council tax down.
Why doesn't the council refuse to accept the government cuts and just keep services going as a protest against austerity?
Councils are legally required to set balanced budgets at the start of every year and councils are not allowed to carry forward a deficit at the end of the financial year. It would be completely unlawful of us to spend more money than we have available and we have made it clear that we will meet its financial responsibilities and operate within the law.
Your proposals only add up to £78m. Where are the rest of the savings/cuts coming from?
Around £30m of the council's budget shortfall is a direct result of reductions in government grant funding. The remaining £60m is a result of unavoidable cost pressures that the council has to absorb. The council has worked very hard over recent years to deal with cost pressures by making efficiencies and reducing the running costs of the council.
The council will continue to deal with cost pressures and this will contribute to the further £12m of the £90m savings / cuts. This also includes significantly reducing management posts.
How can the council possibly have to save £90m when it's got £400m to spend on capital projects across the city?
Capital money is separate to what we spend day to day on running services and paying wages. These operating costs are known as the revenue budget, and this is where we have to save £90m. We cannot use capital money to avoid making cuts to services.
Our capital money has to be spent on fixed or physical assets like buildings, schools, council owned housing and includes things like superfast broadband and preparing land and transport links for new investment sites, for example in Scotswood, around Central Station and at Science Central.
Whilst we face some tough decisions about cuts to services, we'll still be doing our bit to invest in the jobs and infrastructure our city needs to be ambitious and lead the region's economic recovery.
Our capital investment plays an important role in improving economic opportunities across all parts of Newcastle.
Why can't some of this capital money be spent on saving popular local facilities like the City Hall and City Pool?
The main source of capital money comes from our ability to borrow it's not money sitting in our account ready to spend on day to day activities. We are able to borrow money where we can demonstrate that it will lead to a long term return on our investment on behalf of the city. By investing up front we can often demonstrate that spending will reduce in later years because the investment generates income or because it helps make services more efficient.
In the case of the City Hall and City Pool we have not been able to identify a credible business plan which would support a decision to borrow to invest by guaranteeing long term financial benefits. We are very willing to listen to any constructive proposals for the future of these sites especially if they can help preserve amenities for the benefit of the city.
Why are you implementing a living wage when the council can least afford it?
We believe that paying a living wage is an investment in people and families and a major part of our work to tackle inequality. A living wage makes business sense too, as those on low incomes are more likely to spend their money locally which can safeguard and create jobs in the North East's economy.
The £1m costs of paying the living wage of £7.20 will be met entirely from reductions in management costs.
You seem to have made up your mind that cuts are inevitable why should we bother getting involved in the consultation?
There is absolutely no doubt that cuts of the scale being implemented by the government will require councils to cut services. This is unavoidable.
However, this represents a fundamental change to the way we will operate in the future and it is very important that councillors hear the views of local people when reaching these important decisions.
We welcome any constructive alternative proposals for reaching the necessary budget savings without cuts to services. We are particularly keen to understand how the budget proposals might impact on local people and those who depend upon our services. There may be ways that savings proposals might be implemented differently to avoid some of the more negative consequences for service users and we would like to hear from people who have ideas about this.
Cuts on this scale are very likely to mean that some people will lose service they have become accustomed to and it is important t hat local help councillors understand whether cuts to services have been applied as fairly as possible in the circumstances.
This is a genuine consultation. No final decisions will be taken until the council meets to set it budget in March. It is very important that everyone takes the opportunity to have their say before the consultation closes on 1 February. The best way to have your say is by completing the survey on our website www.letstalknewcastle.co.uk
How have you decided how big the cuts to each service should be?
We must find savings of £90m over the next three years - that's a third of our current annual budget. This is a very difficult challenge and it will mean significant cuts across all parts of the council. Every effort will be made to ensure that cuts have been allocated fairly.
To ensure that proposals meet our overall savings target, guidance on the level of cuts necessary was provided to officers developing options:
- Specialist services aimed at helping the most vulnerable people in our community, such as care for older people, those with severe disabilities, and young children at risk of harm, will face the lowest level of cut. This support is expensive to provide and it forms a large part of our budget. The number of people needing our help is growing all the time.
- Targeted services aimed at helping those who are at risk of falling into harm and greater need face the next highest level of cut. These services like debt advice, welfare support, homelessness advice, work with young offenders, and drug and alcohol support, help to prevent problems escalating to the point where they create more expensive problems for us, the health service or criminal justice system to resolve so it is makes sense to protect these services to prevent longer-term problems occurring.
- Those universal services that everyone recognises like bin collection, litter clearing, parks, libraries and leisure services will face the next highest level of cut. These are the services that most people see on a day to day basis. Cuts in these areas will be significant and people will certainly notice a difference. We know that people often feel very passionate about these services in their local area but we have to strike the right balance in making sure that we protect those in greatest need whilst continuing to provide a service to the wider community.
- Support services are an essential part of keeping the council running smoothly. However it is essential that services to residents and the vulnerable are safeguarded as far as possible. Therefore support services are being asked to operate at the lowest cost possible to keep the council running. This is reflected in the highest level of budget cut.
The Daily Mail and the Daily Telegraph have made a series of allegations which cast doubt on whether the council's financial position is as dire as is claimed. It isn't true that the council is cynically exaggerating the problem to make a political point against the coalition government.
Newcastle City Council has been absolutely open and honest about the scale of the financial challenge facing the council and the city over the next three years. We welcome a robust debate about the issues this creates because this is the best way to find a realistic way forward. There is nothing to be gained by misrepresenting the reality of financial austerity or deferring this robust debate as this just stores up problems for later.
We utterly refute any allegation that the council is misrepresenting its financial situation. The Daily Telegraph and the Daily Mail have traditionally taken a very clear political and editorial stance, and we understand that they find it difficult to accept the unpalatable truth about public spending cuts. Misinforming readers does a disservice. It is worth noting that very few of our responses to the Daily Mail's questions were included in their article, and only half of a short statement we gave them was published.
In answer to the specific issues raised in their report:
Local Government spending is only going to fall by an average 1.7% in 2013/14 and councils are deliberately exaggerating the problem.
This is not true. This figure is based on the absolute level of grants, and takes no account of much higher levels of cuts to councils with greater needs and a lower council tax base. This approach disguises the true scale of differential cuts across the country. Whilst all councils are facing cuts of some degree, the allocation of those cuts has effectively transferred income from urban to rural, from north to south and from the most to the least deprived councils.
Using the government's own figures comparing affluent Wokingham with Newcastle from 2011-13 Wokingham's grants and spending power has been cut by around £2 per household compared to Newcastle £329 per household. Over the next two years DCLG's own figures show a further cut of spending power per household of £59 for Wokingham and £174 for Newcastle.
The way in which Government allocates funding to local government is complex and confusing, making it too easy to misrepresent the way in which cuts are allocated. Newcastle City Council has lost confidence in the way the Government allocates funds and is calling for a new independent and open system for allocating funding to local councils based on their need and their ability to raise local council tax.
Councils are sitting on reserves that could be used to reduce the impact of the cuts.
This is a misrepresentation of the reserves figure included in our accounts. The £93.5m figure quoted for "usable" reserves includes £12.1m that belongs to individual schools and may only be used by them, £20.7m that belongs to the Housing Revenue Account and may only be spent on council housing and £7.6m of capital grants/receipts that may only be used to fund capital expenditure. Of the remaining £53.1m, £10.1m is unearmarked and £42.9m is earmarked for specific purposes.
The unearmarked balance of £10.1m represents only 3.8% of the net budget and is an essential 'safety net' to ensure the Council is financially resilient.
The earmarked reserves of £42.9m consist of a number of different earmarked amounts:
- £3.8m to off-set the Council's share of the estimated Collection Fund deficit.
- £4.0m to support the implementation of the Council's 2012/13 budget programme, which as of today has been fully utilised.
- £12.5m that relates to grant funding received from the government to pay for PFI schemes.
- £1.1m of revenue grants that have been given to the Council for a specific purpose but have yet to be physically spent.
- £12.8m to fund redundancy costs relating to 2013/14 job losses.
- £8.7m to fund a range of specific revenue and capital projects.
The council employs 277 people earning more than £50k an increase on previous years.
This is a misrepresentation of figures in our accounts. The figure includes long serving staff who were made redundant in the last year and received redundancy payments in excess of £50k, as well as staff who are still employed and earn salaries of £50k or more. The number of managers in the council has reduced significantly in recent years and will reduce further as a result of a forthcoming management review.
Staff made redundant by the council have received very large settlements totalling £16m. Eleven staff received payments of between £100-150k and one person received £190k.
As a result of government spending cuts and unavoidable cost pressures the council has made significant numbers of staff redundant in recent years. To deliver long term savings in staffing costs there is inevitably a short term cost in meeting legal and contractual obligations in relation to redundancy. Newcastle City Council's redundancy arrangements are in line with most other councils and public sector organisations. Only one member of staff received a redundancy payment in excess of £100,000 which was in line with their contractural entitlement. The figures that appear in our annual accounts do not cover redundancy payments alone, but also pension payments the authority must make on their behalf, single status arrears payments to ex-employees or pay protection payments for that particular year.
Newcastle city Council has re-employed 55 staff it previously made redundant.
This is a misrepresentation of the facts. A small number of employees who received redundancy payments and subsequently went back to work were largely casual workers working in schools to cover short term assignments such as exam invigilation. Only one or two were employed directly by the council.
Newcastle City Council staff spent £937 ringing the speaking clock to make themselves look busy.
There is no truth in this whatsoever. The costs of calling the speaking clock relate to the time sensitive automation process used for raising and lowering bollards and parking barriers. This amounted to £36. The remaining £900 of calls were made from schools, business development centres and museums for which the council is responsible. There is no evidence that any council staff rang the speaking clock. This denigration of public sector workers at a time when their jobs are at risk is completely unwarranted, and to suggest that they rang the numbers to look busy is reprehensible.
The Waygood gallery project in Newcastle is millions of pounds over budget.
The Waygood gallery project has been successfully completed. The cost was £10m. The council contributed a third of this and the remainder came from the former regional development Agency One North East, the Northern Rock Trust and the Arts Council. The project also received some European funding.
Newcastle City Council is taking a scorched earth approach to arts funding with an immediate 100% cut.
This is not true. The council is consulting on a proposal to reduce its funding to arts institutions over the next three years - 15 per cent in year one, and 42.5 per cent in year two and 42.5 per cent in year 3, though the amount of cut that individual organisations may receive may differ from each other in years two and three. We are taking a three year view so we have plenty of time to work closely with arts institutions to help them adapt to this reduction in funding which accounts for between 2.5 per cent and 15 per cent of their total budget. While this is significant to them we would not expect organisations to close as a result of the council's cut alone. Although the proposal to cut contributions to institutions is by 100 per cent the council is still investing £9.5m in culture across the city over the next three years.
Newcastle pays travel and mileage costs at a far higher rate than other authorities - 65p per mile compared to the HMRC recommended level of 40p. This extra £1.5m extra petrol cost is the same as the saving made by cutting all funding to the arts.
The current HMRC mileage rate (as quoted by Eric Pickles in "50 Ways to Save") is 45 - not 40p - per mile. We pay staff who use their own cars for work purposes 46.9p per mile, which is only slightly above the HMRC rate. This rate has remained the same since 2010.
Page last updated: 20 December, 2013