The 'crisis' facing North East councils that the new Labour government must address

Gateshead FC fans protest outside Gateshead Civic Centre.
-Credit: (Image: Iain Buist/Newcastle Chronicle)

As football fans in the North East know all too well, your team reaching the promotion play-offs is an experience fraught with emotion – the fizzing excitement and tantalising hope of reaching a promised land, the utter dread of falling at the final hurdle.

That it can all end in despair is part of the sporting bargain. But for fans of Gateshead FC, the dream of promotion to the English Football League (EFL) was ripped away this year for reasons none of them expected.

The Heed were blocked from competing in the National League play-offs due to doubts over whether their council-owned home ground, Gateshead International Stadium, will stay open. Because the cash-strapped local authority can no longer afford to run the stadium and is trying to find an outside operator to take it over, the football club failed to meet the EFL’s requirement for aspiring members to have a 10-year lease on their ground.

The debacle over Gateshead Stadium, a famous venue that has played a key role in the region’s sporting and cultural history but is now said to run at a loss of £860,000-a-year, is just the latest episode revealing the plight our local councils find themselves in. Hundreds of millions of pounds worth of budget cuts have been made here over the last 14 years, as austerity measures have hit hard.

It has meant major redundancies, the loss of Sure Start centres, swimming pools and libraries being closed down, and internationally-acclaimed support for Newcastle’s homeless recently being put on the chopping block — to name only a few examples. All while residents have been asked to pay more in council tax in order to balance the books, as local authorities see their government grant funding reduced and grapple with the spiralling costs and escalating demand for adult social care, children’s services and home-to-school transport that take up an increasingly massive portion of their budgets.

Councils in England now face a funding gap of £6.2 billion over the next two years alone and, according to the Local Government Information Unit (LGIU), half of all town halls could go bankrupt by 2029. For local government leaders of all political colours and across the length and breadth of the nation, it is simply imperative that Sir Keir Starmer’s new government takes serious action during this parliament to redress the balance — or risk more councils going to the way of Birmingham and the axe falling on yet more vital, if often under-appreciated, frontline services.

Gateshead Council leader Martin Gannon, whose authority has made £179 million of cuts since 2010 but still faces a shortfall of around £50 million in the next five years, told the Local Democracy Reporting Service that around 75% of his council’s budget is now spent on providing social care and looking after vulnerable children – and that figure is only growing, posing a “real problem for the Labour government”. The veteran Labour politician said he was confident Gateshead will not go bust, but “unless the whole structure of local government finance changes huge numbers will – and Gateshead, if there are not further resources from central government, will look a lot different in three years’ time”.

He has called on the Starmer administration to bring an end to competitive bidding systems that pit councils against each other to get government cash – a process that recently led Durham Council to spend more than £1 million on failed bids to the Levelling Up Fund. Coun Gannon, who is now also the deputy mayor of the North East, also wants government grant funding for councils to be distributed on the basis of need and deprivation, rather than population.

He added: “Unless something changes, we will get to a situation where if we spend every single penny we have on adult social care and do nothing else…you would still not have enough.”

The growing pressure on councils of providing social care to an ageing population living for longer and with more complex needs is clear. Newcastle City Council’s gross annual expenditure on adult and children’s social care services jumped by more than £78 million between 2010 and 2023, according to figures obtained by the Local Democracy Reporting Service, and the amount of its total net budget spent on social care rose from 54% to 69% in that time.

In those years, the budget cuts that civic centre finance officials needed to make across the board totalled well over £300 million. Durham County Council’s adult and children's social care spend has jumped by £144 million and Northumberland’s by £74 million.

Jonathan Carr-West, chief executive of the LGIU, is also among those demanding sweeping reforms from this Labour government to prevent more councils from going bust. He told the Local Democracy Reporting Service: “Councils have been pulling every lever available to them to balance their books: raising council tax, cutting services, and spending their finite reserves, and still we are seeing an ever-increasing number of councils unable to make ends meet in the face of central government spending cuts and increasing demand for – and cost of – council services, particularly adult and children’s social care. More than half of Newcastle City Council’s budget goes on social care alone.

“The scale and severity of the financial crisis in local government has led to six councils declaring bankruptcy, with half of all councils in England warning they too will go bust in the next five years if nothing changes. At the moment, the funding local government receives from central government is completely disconnected to the amount they need. The opportunities for councils to raise their own funds is heavily restricted.

“We need to entirely reform council finance to a fairer funding model that allows councils to deliver the services people need and expect, while providing longer-term clarity on the amount of money local authorities can expect from central government. We should unleash councils’ options to raise their own money while allowing them to spend on what local residents need, not what Whitehall thinks they need.

“Devolution offers enormous opportunity for regional growth and power, with localised decision making on transport, housing and health which must be delivered hand in glove between central and local government.”