Budget review reveals £14m 'black hole'

05-AUG-09

Issued by: Jeanette Hedley

In a financial report to North Tyneside Council's Cabinet, officers are warning of a £14m shortfall in the capital expenditure budget, which covers major items like school buildings, housing, regeneration and infrastructure projects.

The budget set in March this year under the previous administration had a target generating £14,377,000 income from land sales to help cover expenditure. However, to date just £162,000 has been received leaving a £14,215,000 gap between planned expenditure and actual income.

The report goes on to say, if income from land and asset sales is not received then the only way to cover a shortfall will be to increase Council debt, which is already at a record high of £320m and was planned to rise by a further £75m by 2013/14, if expenditure was not cut back.

The cost of paying for Council debt is set to rise from £9m in 2007/08 to £19.5m by 2013/14. If unchecked the effect of the debt will also see a dramatic rise in Council Tax bills, with an increase of £104 per household on Band D by 2013/14 to cover the cost of paying the interest. This is before any extra borrowing to cover the shortfall.

Commenting, Mayor Linda Arkley said: "This report confirms my worst fears about the Council's budget which I inherited in June from John Harrison. This is why we need to review all non-essential spending. 

"Quite clearly there are some tough decision to be taken. The Council cannot spend money it does not have otherwise we will be taken to the brink of bankruptcy yet again and that is something I am determined will not happen." 

The Council report also shows that the annual revenue budget contains a number of financial pressures which are being managed within services, and an overall £3.6m overspend currently projected for the year.

The Mayor and Cabinet are determined to address this immediate problem and bring Council spend back on budget for the benefit of the borough's residents. They are working closely with officers to that end.