Newcastle MP wades into row over Council’s vanishing cash

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14 Jan 2011

Newcastle’s Labour MP Paul Farrelly has intervened in a growing row within the local Council over the Borough’s disappearing cash reserves.

The move follows demands from Councillors as to how a £40 million plus buffer left by Labour locally in 2006 - when the Conservatives and Liberal Democrats took over the Council – is on the verge of vanishing completely by 2012.

The loss of the safety net comes as the coalition government plans to cut its grant to the Borough by nearly a quarter – 24.3% - over the next two years, threatening jobs and frontline services.

That equates to 12% of the Council’s entire budget - far more than cuts to better-off areas in the south and rendering the whole exercise utterly unfair, Mr Farrelly said yesterday in a Westminster debate on local government finance.

‘In order to tide themselves over the transition, many Councils will be forced to dip into their reserves. That will clearly have an impact on future income generation,’ he told the House of Commons.

‘In Newcastle-under-Lyme in 2006, after transferring the housing stock, the Labour party left reserves of over £40 million. Under the Liberal Democrat and Conservative local government coalition, those reserves now stand at £24 million.’

‘At that rate of spend, and commitments in the pipeline, it looks as if the reserves will run out by 2012. There has been no satisfactory explanation of how that situation was reached, or of whether council tax payers have gained value for money,’ he added.

Mr Farrelly is due to meet new Borough Chief Executive John Sellgren at the end of the month to discuss the impact of the government’s cuts and the state of play with Newcastle’s finances.

Highlighting the unfairness, during the debate Mr Farrelly named Windsor and Maidenhead, Poole, West Sussex, Wokingham, Richmond on Thames and Buckinghamshire, all in the prosperous south east, as facing cuts of under one per cent. And Dorset, MPs were told, is actually getting a slight increase in funding.

Neighbouring Stoke-on-Trent, meanwhile, is among the neediest authorities, which are being asked to shoulder the biggest cuts. Others include Liverpool, Tyneside and Manchester – which this week announced plans to cut 2,000 jobs as a result.

Labour left Newcastle debt-free, and with prudent reserves, after co-ordinating the transfer of its council housing stock to Aspire Housing a decade ago.

It also set aside reserves to rebuild the town’s Victorian swimming baths, which is now finally going ahead following needless delays with the new administration.

Since 2006, the Conservative and Liberal Democrat coalition has lost money by making ill-judged deposits with an Icelandic-owned bank, just before the crash.

It has also invested in town centre improvements, including the Guildhall and Lancaster Buildings.

It was, however, also helped by large regeneration grants from the Labour government and Councillors, including Labour Group Leader Eddie Boden, have recently been demanding a full account of where all the Council reserves have gone.