How did we fall so far into red – and can we get out?

ONE of the first remarks uttered by council leader Ross Irving following his surprise election victory in June was a dire warning about the "glacial economic climate" that he said would soon wreak havoc upon the public sector.

He repeated the phrase again yesterday as councillors were given the first detailed idea of just how serious the crisis facing the city was likely to be.

Mr Irving and interim chief executive Chris Harman say the council is well placed to weather the financial famine sweeping local government, because it made £30 million of efficiency savings in the past two years.

But the flip side of this is that the easier cutbacks have already been made, and it now will be a case of choosing the least worst options.

Some councillors have also questioned why the grim news has come out now, less than halfway through the financial year.

In February, the council approved a budget based on a 3.95 per cent council tax rise which called for £11 million of efficiency savings, including £4.3 million from community services. The council also planned to top up its dwindling £4 million reserves.

At the time, elected mayor Mark Meredith said he had been forced to increase council tax from the 2.7 per cent he had promised because of soaring inflation and overheads.

But within four months of the budget being passed, figures showed that not only was the council not generating the income it had predicted, but it was also paying out far more than it had allowed for.

Pressures which have affected the budget since April 1 include:

A £1.3 million reduction in income from investments due to plummeting interest rates and uncertainty over foreign investments;

A £1 million drop in revenue generated from planning charges and business rents;

A £755,000 increase in demand for direct payments to provide home care packages;

A £750,000 shortfall in income from city council car parks;

A £530,000 increase in take-up of learning difficulty support services;

A £500,000 increase in cost of placing children in independent care;

A £445,000 rise in demand for independent sector home care services;

A £175,000 decline in use of city council-operated sports facilities.

Chris Harman says these factors could not have been predicted when the budget was drawn up.

He said: "What councils across the country have found is that the impact of the recession has been very swift and very sudden.

"It has had an effect across all of our services at the same time as we are seeing an increase in demand for those services.

"But we have made difficult decisions in the past and we will continue to make difficult decisions."

The council leader's pledge to shield frontline services from cutbacks should protect key departments such as social services, education, benefits and enforcement.

But hundreds of back-office staff are bound to be left feeling very exposed by his remarks.

Proposals for previously unpopular cuts to libraries, bowling greens, community halls and sports centres are also sure to be revisited in the coming months as the debate about precisely which services a local authority should offer its residents is reignited.

Local government reformers want to see councils switch role from providers of services to enabling organisations which help residents find assistance through the private or voluntary sectors at a fraction of the cost to rate-payers.

But some see the current economic crisis as a propaganda tool to usher in sweeping changes and silence any public opposition.

Potteries Alliance leader Councillor Peter Kent-Baguley said he found it impossible to believe council managers had not had some idea of the scale of the problems to come when the budget was being approved.

He said: "I think this has just been an exercise in scaremongering. Every time we ask a question we get accused of bringing in the blame culture, but members are here to ask questions and get answers.

"If this forecast is just a snapshot and everything is really under control, then why bother us with it?

"The truth is that nothing is under control and I want assurances that we are going to get the full facts on what has happened."

Non-Aligned Group spokesman Councillor Mick Salih said: "I think every councillor will want to know how we got into this position and what the executive is going to do to get us out of this mess."

City Independent Councillor Dave Conway, pictured, said he felt it was time for a realistic assessment of the budget, instead of promising savings which later fail to materialise.

He added: "Everyone makes mistakes, but the important thing is not making those mistakes again."

But Mr Irving said he had every faith that the council would turn the deficit around by April.

He said: "There may be some disquiet among the general members of the council, but I believe the cabinet realises the magnitude of the problems we are facing and is prepared to deal with them.

"We don't want a them-and-us situation to develop; we want the backing of members to help us achieve what we need to do."