A £64bn package to support local councils does not go far enough to deal with 'severe' financial pressures and will not avert the need for more cuts, North East leaders have warned.

The Government announced its provisional local government finance settlement on Monday (December 18), saying it was offering a 6.5 per cent uplift for 2024/25 to help struggling authorities deal with the impact of inflation and rising demand for services including social care.

There are major concerns about town halls across the country being pushed to crisis point and several, including Nottingham and Birmingham councils, have already effectively declared themselves bankrupt.

Newcastle City Council leader Nick Kemp warned that the latest settlement “does not provide enough funding to meet the severe cost and demand pressures which have left councils of all political colours and types warning of the serious challenges they face to set balanced budgets next year”.

Monday’s £64bn settlement, which the Government said amounted to a rise of almost £4bn from 2023/24, assumes that all authorities will impose the maximum possible council tax increase of 5 per cent.

The city council announced last month that it needed to save almost £60m by 2027, on top of £369m worth of cuts already made since 2010.

Its proposals include ceasing a crisis support service and reducing the number of beds available for Newcastle’s homeless, something which charity Changing Lives has branded “inhumane”.

Cllr Kemp said Monday’s announcement would “leave hard-working families to pick up the tab with higher council tax and local services cut to the bone”.

The Labour councillor added: “It is unthinkable that Government has not provided desperately-needed new funding for local services in 2024/25. Although councils are working hard to reduce costs where possible, this means the local services our communities rely on every day are now exposed to further cuts. 

“Demand for crucial services provided by councils – such as children’s services, adult social care, temporary accommodation and home to school transport – is rising, and inflationary pressures are increasing costs for councils. This has left councils facing a perfect storm of rising demand and costs – all following thirteen years of continued cuts to council finances.

“No council is immune to the growing risk to their financial sustainability. The Government urgently needs to address the growing financial crisis facing councils and come up with a long-term plan to sufficiently fund local services through multi-year settlements.”

In neighbouring Gateshead, council leader Martin Gannon agreed that the 6.5 per cent uplift would not cover the “huge gap” on the civic centre’s balance sheets.

Gateshead Council has a predicted £50m financial black hole over the next five years and has already taken controversial measures including the closure of two leisure centres this summer.

Ministers argued that every council in England would be guaranteed at least a 3 per cent increase in their core spending power regardless of decisions on council tax.

Levelling Up Secretary Michael Gove said: “Councils are the backbone of their communities and carry out tremendous work every day in delivering vital services to the people they serve. We recognise they are facing challenges and that is why we have announced a £64bn funding package to ensure they can continue making a difference, including through our combined efforts to level up.”

The Conservative-led County Councils Network, which represents England’s largest councils, said that county authorities will be ‘bitterly disappointed’ by the announcement.

Jonathan Carr-West, chief executive of the Local Government Information Unit, called the funding “simply too little, too late”.

He added: “There is little confidence across the sector in local governments’ financial resilience. In March this year, only 14 per cent of senior council figures said they were confident in the sustainability of local government finances. Since then, three more councils have announced their effective bankruptcy.”