Gannon: Council cash model ‘unsustainable’

“THE wolf is at the door” - that was the bleak warning from the leader of Gateshead Council as he looks to the borough’s future as the impact of coronavirus continues to be felt.

Martin Gannon said a lack of cash means local council finances across the country are “just not sustainable”.

He said unless the Government provides more money than the council will have to “radically reduce” what it offers.

This comes after council figures warned it faces an £18.6m black hole in the next financial year.

It also estimated over the next five years the borough is facing a funding gap of £58.4m.

Coun Gannon said: “It is not just Gateshead, it is all local government - the present funding model is just not sustainable.

“We have statutory services to provide, children’s and adult social care, if there are problems with families and children need to be taken into care and elderly people need to be supported.”

Coun Gannon said the authority spends the vast majority of money on social care services it has a legal obligation to provide.

This comes at a time when the authority’s income is dropping after the pandemic caused it to close chargeable services and reduce the amount of council tax it can collect.

He continued: “We are spending 70 to 75% of every penny on doing that. Covid-19 has taken away our income base, such as council tax and services we were charging people for things such as leisure centres.”

Recovery action for council tax and rent arrears were suspended for council tenants suffering loss of income due to the crisis.

Coun Gannon also said the pandemic has forced local councils to face up to issues previously years down the line. He said: “Coronavirus has brought a lot of things forward which were going to happen six or seven years from now, such as transport patterns and an impact on retail.

“Now the same has happened in Government finance and it is reaching unsustainable levels.

“The wolf is at the door, not at the bottom of the garden path. Some local authorities are receiving warnings from their financial officers.

“You can only spend reserves once, you cannot spend them next year because they are gone.”

In the middle of December, Gateshead Council’s cabinet voted to approve a new budget-setting process which would see the authority carry out a “fundamental review” of its capital investment programme.

The same document stated the coronavirus pandemic would cost the council in the region of £50m and that its impact would be felt for years to come.

Coun Gannon continued: “Early in the new year we will be able to publicise it to people in Gateshead.

“It will be radically different unless the Government gives us extra resources - we will survive but in a radically reduced fashion.

Coun Gannon said the council needs to find other ways of making money and has pointed to an ambitious development programme.

This includes housing, office schemes such as the £13m Riga building which was completed earlier this year, and the massive £260m Quayside arena development which was approved in November.

He added: “That’s ultimately about building.

“The quayside for example and building new houses which means people will pay council tax which we would not have had.

“If local government is important, and it is, we have to find ways of financing it.

“The current expenditure model does not work.”