Mini-Budget Mayhem for Newcastle City Council

One of our writers discusses the Chancellor's new economic policies.

Jessica Gadd
17th October 2022
Chancellor Kwasi Kwarteng
On September 23rd, Chancellor Kwasi Kwarteng set out a number of economic and financial policies covering issues such as tax cuts and energy costs, commonly known as the mini-budget. Some key policies include the scrapping of the corporation tax rise, which had previously been set to increase from 19% to 25%, restrictions to universal credit, and a cut in the base rate of income tax.

This mini-budget saw economic distress across England, with a record-breaking fall in the pound and a soar in mortgage rates. Moreover, Kwarteng’s deafening silence on funding for public services amid high levels of borrowing and threats of austerity 2.0 has left councils especially worried about what this financial package will mean for them.

Newcastle city council and other organisations have already warned of financial turmoil since the announcement. A leaked report showed that Newcastle City Council were facing a £30 million cost spike by next year due to spiralling inflation. Factors such as the combination of rising energy bills, pay rises and contract inflation could see a budget deficit for the council of a whopping £22.2 million. Deputy leader of the council Karen Kilgour warned of uncertain funding and a clear increase in risk following the crisis. Additionally, Liberal Democrat Councillor Gareth Kane explained that the council were already expecting an overspend due to rising inflation, so the chaos following the mini-budget announcement could pose a “massive risk” to the council in the long term.

Also expecting a substantial overspend and looking for solutions, Northumberland County Council has already offered their staff the opportunity to apply for voluntary redundancy, hoping to prevent a £12 million overspend. Similar budget deficits are expected throughout the area, with both Durham City Council and North Tyneside Council facing similar financial difficulties for the upcoming year.

This persistent uncertainty suggests that this is a mini-budget in name only, as there have been significant repercussions and high levels of distress throughout the financial community. As a result, we can expect councils to make a number of difficult decisions to compensate for escalating inflation that shrinks their funding alongside the ever-growing demand for public services.

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