Council faces extra £2m burden in deepening financial crisis

ONE of Yorkshire’s largest councils is facing a deepening financial crisis after being hit by unexpected costs from a flooding disaster and the collapse of a credit union which are compounding cutbacks that are expected to soar past £90m.

North Yorkshire County Council is faced with having to counter a total of £2.5m in unplanned costs which finance chiefs admit are placing its creaking budgets under intense pressure with swingeing cuts already planned that will affect front-line services and place hundreds of jobs under threat.

The bill for damage to roads and bridges due to extensive flooding in September caused by the worst autumn storm to hit the UK in 30 years is expected to reach nearly £2m. While the cost is less than the initial estimate of £3m, the council’s chief finance officer Gary Fielding revealed the authority will now have to foot the bill as the Government has confirmed it will not step in to ease the financial burden.

The collapse of the North Yorkshire Credit Union earlier this month after accruing outstanding debts of more than £400,000 has meant the council has also had to write off a £200,000 loan it provided to set up the stricken organisation in 2009.

And the authority agreed last week to contribute a £30,000 grant to a fund totalling £100,000 which will allow a new credit union to begin operating later this month.

The final unexpected financial blow has come after the council has had to earmark £300,000 to help finance a flood defence project to protect one of the region’s worst blackspots. The six-figure sum will be used to fund the Slowing the Flow scheme in Pickering, which is due to cost a total of £1.6m, with the remainder of the cash coming from other organisations including the Environment Agency and Ryedale District Council.

The unplanned costs have blighted the county council as it faces enforcing extra cuts of nearly £22m over the next two financial years on top of the £69m in savings it is already having to make.

Mr Fielding said: “These additional costs are placing the council under immense pressure. We remain committed to providing the best possible services, but the public needs to be aware that some of these services will be severely affected in the future.

“We are having to look at services across the board, and while we have a statutory duty to provide them, they will undoubtedly have to be delivered in a different way. The council is a big organisation, and as such it can be hit by unexpected costs from so many different areas.

“We thought that we were in the eye of the perfect storm two years ago when we were faced with making the £69m in savings, but now the situation has got even worse.”

The Yorkshire Post revealed last month the council had been hit by the £22m in unexpected costs as the Government intensifies its austerity drive. As many as 400 posts could go in the next two financial years from the authority which has already shed more than 1,000 workers over the past 18 months. Frontline services including public transport, libraries, the schools music service and outdoor education have already had to be scaled back.

Mr Fielding admitted all services are under review including those for the elderly and the most vulnerable in society which have until now been largely unaffected.

The council’s reserves of £23.2m will be used to pay for the unexpected costs of £2.5m while also helping cover the additional savings that need to be made.

Mr Fielding stressed, however, that £7.3m needs to remain in the reserves under the authority’s policies of ensuring two per cent of the council’s £360m net revenue budget is kept back.

The projected cutbacks of £22m are based on preliminary assessments and announcements, which may have to be amended when formal agreements on funding are made with the Government in January.