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Opposition as Newham Council proposes crisis budget    

Peter Landman and Aidan White report on Newham’s battle to stave off bankruptcy as councillors meet to decide on cuts, increases in charges, and new efficiency measures

Old Town Hall Stratford
Old Town Hall Stratford Katie Chan CC-BY-SA-4.0

A grave financial crisis looms over the Newham Council meeting on 27 February when councillors will discuss a controversial plan to increase Council Tax by 10 percent and put up council rents by 2.7 percent in a draft budget which opponents have already condemned as “reckless”.

The continuing homelessness crisis and a spiralling bill for adult social care have driven Newham to the brink of bankruptcy with the Council struggling to fill a £157 million hole in its budget in the coming years.

The Council has drawn up a crisis strategy that includes asking the government for extra help and permission to increase Council Tax by 10 percent – twice as much as is allowed under the current five percent cap.

The Council also plans to sell off local assets, increase Council house rent and cut, by 10 percent, the Council Tax relief available to some of the poorest people in the Borough.

At the heart of the strategy is the appeal for government financial support, which as well as removing the five per cent cap on Council Tax increases, will allow the Council to sell off assets.

The Council Cabinet meeting on 9 January put together a budget plan they hope will avoid bankruptcy and make up the expected £157 million deficit. If they don’t succeed, the Council may be forced to declare a Section 114 notice which would see government auditors taking charge of the Borough’s spending to balance the books. This could lead to even more cuts in services to ensure Newham meets its legal obligations to look after the homeless and provide social care for the neediest adults and children in the Borough.

This is why the Council is asking the government to step in and provide a cash lifeline. Council leaders argue that Newham is not alone in feeling the pain of increased poverty and homelessness, particularly in London. Around the country, 19 local authorities have already received exceptional financial support from the government.

In a statement, Councillor Zulfiqar Ali, Cabinet Member for Finance and Resources highlighted how the Council has taken soundings from the local community. “We have listened to residents through our consultation, who understand the escalating housing and social care pressures facing Newham Council,” he said, “and we have reflected their views in our draft budget proposals.”

But there is strident opposition to the budget plans. The leader of the Independent Group of councillors, Mehmood Mirza, has launched a Change.Org petition – Stop the 10 percent Council Tax Hike in Newham – calling for more transparency over Council finances and action to protect the most vulnerable people in the Borough.

He told Newham Voices he would vote against the Council Tax rise. “This hike will place an unfair financial burden on residents, many of whom are already struggling with the cost of living. What’s worse, despite demanding more from taxpayers, the Council is still cutting essential services.”

And Councillor Nate Higgins, Leader of the Green Group, told Newham Voices: “It takes a special kind of recklessness for Labour to increase Council Tax by a whopping 10 percent while gutting Council Tax discounts for our most vulnerable residents.

“At the same time, they’re hiking costs for vital services and cutting Our Newham Money, a lifeline for people who cannot make ends meet.

“People are being told to pay more and get less. Worse still, Labour’s not using much of this extra cash to help residents – they’re stashing it in reserves while selling off council assets and wrecking people’s finances.”

He added: “The cruel budget reflects the same callous priorities we’ve seen from the central government: cut, cut, cut from the most vulnerable. These are the very last residents we should be asking to pay more.”

In detail, the budget foresees a £20 million total savings across all departments in 2025/26. Among other points are:

  • £7 million saving through more emphasis on prevention and support for more independent living for both children and adults receiving council care;
  • £6 million from a 10 per cent increase in Council Tax, if allowed;
  • £3 million for a 20 percent increase in council charges and fees;
  • £2.9 million from changing the council tax liability, from 90 percent to 80 percent in the Council Tax Reduction Scheme available to low wage earners;
  • £23 million savings expected through a services transformation programme with more use of information technology to improve efficiency.

Meanwhile, the Cabinet was told the Council will continue to improve the quality of social housing in response to the damning report on its failings by the Social Housing Regulators last October.  

There are also plans for an extra £20 million to be allocated towards increases in adult social care costs as a result of Newham’s rising population. A further £36 million will go into centrally held budgets covering Council contributions to the rise in costs of freedom passes, employers’ extra national insurance, and pay increases for Council employees.

Action taken last year as the crisis has unfolded has already had an impact. The budget report to the full Council meeting on 27 February reveals that the projected hole in the budget is down from £175m to £157m by 2027/28, with £32m savings and cuts in the coming 2025/26 financial year.

Looking on the bright side, the Council statement notes that, even with the proposed Council Tax rise, Newham’s Council Tax is forecast to remain the seventh lowest in London.

Councillor Ali explained: “Nearly 70 percent of our budget, like most councils, is already spent on services for vulnerable children and adults,” he said, “leaving just the remaining 30 percent for every other service we provide.”

This is why the Council plans to apply for Exceptional Financial Support from the government and permission to sell Council assets to fund day-to-day spending.

“This obviously isn’t sustainable,” he said and called for multi-year and fairer funding settlements based on local need for local government.

The Council’s plan includes

  • Council Tax up 10 percent
  • Council rents up 2.7 percent
  • Council Tax support cut by 10 percent

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