Ministers accused of favouring banks over councils for finance

THE Government was yesterday accused of leaving a cash-starved Yorkshire council in the lurch after the Treasury's multi-billion banking bail-out bites deeply into public sector spending.

York Council's already precarious financial situation has been compounded by the impact of Chancellor Alistair Darling's decision to prop up the banking sector during the depths of the recession.

Senior members on the York authority's Liberal Democrat-run executive met yesterday to approve plans for a financial blueprint spanning the next six years – taking into account the massive impact on available funds from Westminster in the wake of the economic slump.

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However, York Council leader Andrew Waller admitted that the proposed budget for the forthcoming financial year had been the most challenging the city had faced in the post-war period.

He added: "We have faced some extremely tough decisions which are largely down to the national debt. Other countries which were stricter in the regulation of their banking sector have not found themselves in such a predicament.

"If the Government had acted sooner, then we would not be faced with the challenges which we are currently experiencing.

"It is an unprecedented financial crisis, but taxpayers' money has been gambled with to bail out the banks and left other areas of the public sector to pick up the pieces.

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"The worrying thing is that the situation with funding from central government is not going to improve next year, or indeed in the next couple of years."

A total of 38bn of taxpayers' money went into propping up the Royal Bank of Scotland, Lloyds TSB and HBOS alone after the banking sector was plunged into crisis.

But the Treasury stressed that the Government still hopes to return a profit when shares RBS and the Lloyds group are eventually sold.

A spokesman said: "The Government took decisive action to prevent the collapse of the banking system and as a result no depositor has lost money.

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"The UK has led the way in responding to the global financial crisis and took the necessary action to support the financial system and wider economy."

York Council has long maintained it is a victim of a lack of Government funding, meaning that city residents have had to pay more for services from refuse collection to social care.

The city traditionally had one of the lowest council tax rates in the country, but York Council has imposed above-inflation increases in recent years to ensure it has enough money.

However, Councillor Waller stressed there is now little room to manoeuvre as local authorities elsewhere impose cost-saving measures that have already been introduced in York.

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The authority is currently involved in a major review – the More for York project – to shave 15m off expenditure in the next three years, potentially leading to 100 full-time posts being lost.

Coun Waller said: "With the More for York scheme, there is no question that the city council will become a different organisation.

"Our main priority is to ensure street level and front-line services continue unaffected. But some of the things we do as a council will have to change if we are to introduce the savings which we need to."

Taxpayers in York were granted some respite yesterday when the executive approved a lower than expected increase in council tax bills for the next financial year.

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York Council's precept on the overall bill had been earmarked for a 2.9 per cent rise, although councillors backed proposals to introduce a 2.7 per cent rise.

This equals an increase of 28.67 instead of 30.80 on the current 1,062 bill for an average band D property in the city, but even so, more should be spent on roads and social care.