NORTH East families face a tax bombshell and public spending cuts as Chancellor Alistair Darling battles to balance Britain’s books.
John Shipley, leader of Newcastle City Council, has warned council tax rises will be difficult to avoid if ministers squeeze local government funding.
He is also concerned about raids on key Whitehall budgets with Prime Minister Gordon Brown pledging to slash the £175bn public deficit.
Mr Brown vowed to curb a “culture of excess” in senior public sector pay and bonuses as he detailed plans to cut another £3bn from the cost of running Government.
He said many salaries above £150,000 and £50,000-plus bonuses would require ministerial approval as part of an efficiency drive – with a review including local council chiefs.
Top earners would be publicly identified and bodies wasting public cash “named and shamed”, he said.
Health Secretary Andy Burnham yesterday confirmed the Government hopes to save £600m by cutting its multi-billion pound NHS electronic patient record system.
Mr Darling may use tomorrow’s Pre-Budget Report to announce the threshold at which the basic and higher rates of income tax will be frozen. Measures could also be announced on inheritance tax. An additional 70,000 people could become higher-rate taxpayers if the 40% threshold remains at £43,875 from April next year.
Mr Darling has declared the better off will have to pay more towards the cost of the recovery – with the prospect of a windfall tax on bankers’ bonuses.
The Chancellor may also confirm VAT is returning from 15% to 17.5% – making goods in the shops more expensive.
Liberal Democrat Coun Shipley said: “Government is already going to raid some budgets across all of Whitehall to make the budget balance. Money is very tight.
“One of our great worries is that the Government is running short of money and will start to raid budgets in areas that matter to local government and the region.
“We are trying to hold down council tax as far as we can, but should there be any further cuts in local government, this would be very difficult to achieve.”
Peter Atkinson, Conservative MP for Hexham, said: “I think it will be bad news not just for the North East, but a lot of the country as a whole, I suspect, because he is going to have to make savings.
“And that is probably going to fall pretty heavily in the North East. And the public sector plays a very significant role in the North East economy.
“The tax burden will have to go up if you borrowed £175bn and it needs to be paid off because the interest charges then are more than the whole schools budget.”
Tyne Bridge Labour MP David Clelland backed a tax on “excessive” bank bonuses and expressed hope that damaging cuts could be avoided.
“The Chancellor is going to have to walk a very difficult tightrope here in getting the finances back on their feet after the effects of the worldwide downturn.
“But I am sure because he is a Labour Chancellor that the most vulnerable will be protected and important frontline services will be maintained.”
His Blaydon colleague Dave Anderson called for a focus on growth, particularly in the energy sector, and help for the Corus steel plant on Teesside.
Mr Brown hopes to shave 20% from the senior civil service pay bill over the next three years – but has refused to detail job losses.
Other planned savings include getting more services online, potentially cutting £600m from telephone and paperwork costs, and a 50% reduction in consultancy fees and 25% in marketing.
But £30m would be spent to get at least another million people online by 2012, said Mr Brown as he unveiled a new report called “Smarter Government” setting out savings.
He hit back at suggestions of long-running inefficiency, claiming it was only because of recent developments in new technology that such savings were possible.
Student loans, jobseekers’ allowance, working tax credits and child benefit would be the first services to move, with exclusively online VAT returns and employer tax returns by 2011.
Mr Brown praised public service as “admirable” and said it deserved fair reward, but added money that could be spent on frontline services was going on “unjustified” salaries and bonuses.
“This culture of excess must change and will change,” said the Prime Minister.
Mr Brown said £3bn of additional efficiencies had been identified since the Budget, taking total planned savings to £12bn over four years.
Jeff Reid, Liberal Democrat leader of Northumberland council, welcomed the plans if it meant ministers actually dealt with the national financial crunch.
“It will mean fewer services and higher taxes, that is an inevitability. We have been living beyond our means,” he said.
The Tories said the plans were the latest in a long line promised by Labour – few of which had been realised.
Treasury spokesman Philip Hammond said: “Efficiency reviews are not the problem; Labour is. Waste and inefficiency remain endemic after 12 years of Labour government.”
Page 3 - Brown promises he will move Civil Service jobs out of London - again >>
Brown promises he will move Civil Service jobs out of London - again
THE relocation of thousands of civil service jobs to the region is a “real and live prospect”, according to No 10.
Gordon Brown’s official spokesman told The Journal that the Prime Minister was “very committed” to shifting jobs out of Whitehall.
The pledge yesterday came after Mr Brown unveiled his new blueprint to get Whitehall into shape amid a spending squeeze sparked by the need to cut Britain’s £175bn deficit.
The Smarter Government report said 10% of the remaining 132,000 civil service jobs in London and the South East could be moved out, with relocations also possible among the 90,000 public servants in arms-length bodies.
A review on relocation of civil jobs will now get under way and report in time for the next Budget, likely in March if the general election is not held first.
Mr Brown’s official spokesman said: “The Prime Minister is very committed to this. The desire to move functions out of Whitehall, which is obviously a much more expensive place than other parts of the country, is a real and live prospect.”
Details about regional centres that could be chosen for jobs had not been detailed, he added.
But he also said: “Newcastle is one of them where there have been Government agencies that have very successfully been moved out of London and have flourished.”
Regional business and council chiefs have welcomed any plans to relocate jobs to the region, but sounded a cautious note with previous pledges of similar action only having a limited effect.
Four years ago the region was promised its fair share of 20,000 jobs to be moved out of London and the South under the Lyons Review that reported Mr Brown, then the Chancellor.
But the North East still only has just over 6% of civil service jobs in Britain.
Simon Henig, leader of Labour-controlled Durham County Council, yesterday strongly welcomed any relocation of jobs to the region as an “obvious” step because of the lower costs in the North East.
“Why not move a whole Government department to the North East?” he said. “This to me has been a missing trick for a long time and it means new reforms aren’t just focused on London.”
The Tories said the Prime Minister had failed to implement the recommendations of the Lyons review, which called for a radical slimming down of Whitehall headquarters and a “strongly enforced presumption against London and South East locations for new Government bodies and activities”.