Council must fill funding gap left by banking crisis
COUNCIL bosses are being forced to draw up contingency plans to plug the black hole in their coffers caused by the Icelandic banking crisis.
As previously reported in the Echo, Exeter City Council has been denied a Government bail-out to cover the losses incurred by the authority following the collapse of the banks Glitnir and Landsbanki.
The decision by the Community of Local Government not to assist the council means it may have to make £1.8m of cuts.
One of the options being considered is the suspension or reduction of part of the council’s revenue budget.
This could include vacant posts not being filled and spending on non-essential services, including building repairs and maintenance, being slashed.
The council could also be forced to delve into its dwindling reserves to fill the gap, leaving them dangerously low.
It is looking at spreading the cost of its redundancy payments, currently earmarked at £1m, over the next five years.
The council’s head of treasury services Andy Stark said the impact of the Government’s decision not to help the authority was “severe”. He said: “We are hoping the Government will reverse its decision about not letting us capitalise. But we are having to assume the worst case scenario and plan for that.
“While we can use our balances and reserves, they start to fall below what is a prudent level. We may have to, for one or two years, look at parts of the revenue budget and put a temporary halt on some of it. This may include repairs and maintenance or vacant posts not being filled straight away.”
Mr Stark said the reduction in the revenue budget would not affect frontline services.
The council had around £5m invested in Landsbanki and Glitnir.
The deposits were just weeks from maturing when the banks collapsed in October 2008.
Its application to “capitalise” the lost investment, which would spread the loss over the next 25 years instead of forcing the council to account for the loss immediately, was rejected by the CLG as it was not satisfied the council faced “exceptional financial difficulty”.
The options to close the funding gap are to be discussed by the council’s resources scrutiny committee on Wednesday.
3 Comments
by Keith, Redhills
Thursday, March 18 2010, 3:12PM
“Before anyone else points it out I would like to apologise for the typing errors in my earlier post! Note to self - stick to one finger on each hand and check comment before pressing submit button.”
by dazza, exeter
Thursday, March 18 2010, 2:28PM
“stop sending out exeter citizens magazines to every household nobody wants the rubbish so stop that will save thousands.”
by Keith, Redhills
Thursday, March 18 2010, 11:18AM
“They will make a substantial savings but not having the reorganisations costs of creating a Unitary council when it is throw out by the courts for being a bad politically motivated decision.”