Cuts loom as city leaders face a £92m black hole

Published on Thursday 21 May 2009 09:58

EDINBURGH council chiefs today revealed they are facing a new £92 million black hole over the next four years, sparking fears of widespread cuts and job losses.

Freezing pay levels, more school closures and outsourcing frontline services to private firms are all on the cards as the city faces up to the fall-out from a planned drop in funding from the Westminster government.

Officials were already anticipating a 39m target in efficiency savings but the latest forecast from finance chiefs claims the council will actually need to plan for 92.3m by 2012-13.

The black hole equates to nearly four per cent of the city council's budget between 2010 and 2013 and could be met by laying off around 2,000 workers, though this is understood to be the local authority's last resort.

Officials will now look at initiatives such as outsourcing frontline services, such as pothole repairs and refuse collection, along with accelerating existing efficiency programmes, such as the schools closure programme, to try to achieve the savings needed.

However, it is thought a council tax freeze will remain in place as long as the 7m offered by the Scottish government to pay for the SNP administration's flagship policy is still on offer.

Other Scottish government policies such as free school meals and reducing class sizes, which city leaders are already struggling to fulfil, are now expected to fall by the wayside.

City finance leader Gordon Mackenzie today warned the city was facing tough times for the next few years.

He said: "We are faced with a very serious situation. Anyone who thinks we will be looking at efficiency targets of less than 3 per cent (each year] has their head in the sand.

"There is no point in waiting for this to happen, we have to start looking right across the council's operations now.

"We know the government has recognised that local authorities will have to keep a very tight pay settlement, and talks on this are ongoing with the Convention of Scottish Local Authorities.

"But our position on job losses has not changed. We would look at this as a very last option and there are other steps first such as natural wastage and voluntary redundancies to consider first.

"We are about to initiate the modernising pay scheme and this represents a three per cent pay increase across the board, which we have accounted for, but the question has to be asked what we can afford on top of this."

The stark predictions follow the Chancellor's budget statement that up to 9 billion in efficiency savings would have to be made from public bodies between 2011 and 2014.

Falling council revenues as a result of the recession, coupled with an increase in demand for key services such as care for the elderly, are also heaping the pressure on the council's resources.

Other issues, including the possibility of further legal action over the equal pay claims and the ongoing affordable housing crisis, could pile even more pressure on the council's finances.

Officials are currently carrying out a root and branch review of every city council function to see if any of its services can be provided more effectively and cheaper if they are outsourced.

It is not thought the review will affect core council services, such as teaching and social work, but will focus on more back-office functions, such as benefits administration.

This initiative will see companies come in and manage or reorganise council departments, with them splitting the money saved with city leaders.

However, other methods of reorganising services, such as setting up arms-length operating trusts like Edinburgh Leisure, are also under consideration. Money is also expected to be saved when a new programme of school closures is announced next month.

City leader Jenny Dawe last week briefed Edinburgh's MSPs about the financial situation facing the council in a bid to try to apply pressure on the Scottish government to aid the Capital's situation.

She said: "We have some very real challenges ahead and we must work with our local parliamentarians to protect and enhance Edinburgh.

"By working together we can more robustly promote innovative funding options and lobby to ensure that Scotland's capital city continues to lead from the front in fighting the economic downturn."

HQ purchase hailed as deal of the year

THE city council's purchase of its headquarters has been named Deal of the Year at the Scottish Property Awards 2009.

City leaders have taken out a 90 million mortgage to buy the Waverley Court headquarters in East Market Street – a move set to save them more than 37m by replacing rent repayments with mortgage payments.

The total purchase price of the building, including fees, is 91.27m, which will cost the council 6ma year over 28 years.

The authority is paying just over 5m per year in rent, but this is due to go up to 6m by 2011 and to more than 7m by 2021.

The Quartermile development won Mixed Use Development of the Year in the same awards.