The Mayor indicated his intention to focus on the financial position of the Council, the impact of the financial cuts so far on the Council and the Town, the national economy and people resident in Middlesbrough, youth employment and the skills shortage and potential new governance arrangements which would affect Middlesbrough Council and others in the Tees area.
With regard to the Councils position it was highlighted that £60 million had been made in savings over the last four years. Up to 2010, a total of £121.5 million savings with mitigation, and £145.6 million without mitigation, had to be made. Middlesbrough Council had coped with a reduction in spending power of more than twice the national average. The 24% reduction in spending power per dwelling equated to £676. This figure was £467 in the north east region and in all of England was £300 per dwelling. The main reason for the 24% reduction was that Middlesbrough had a greater reliance on Revenue Support Grant (Formula Grant) allocated by Central Government than other Councils.
The Mayor highlighted the impact of the cuts so far on staffing which included 728 redundancies, with a further 600 plus redundancies anticipated by 2020. In addition, examples of the impact on operational areas were detailed including the reductions in street cleansing, horticulture, environmental health, the closure of several Childrens Centres, the Consumer Advice Centre, Outdoor Education Centres and the winter closure of the Captain Cook Museum and introduction of admission charges.
The demands on Childrens Safeguarding and Adult Social Health Care were increasing at a rate of £5.3 million per year, year on year. Childrens services referrals remained high at 2300 per year and the number of children in need of social care services had increased by 5%. The number of looked after children had increased by 0.3% and was likely to continue at the same rate or higher for a number of years. Every sixteen looked after children cost the Authority £1.2 million per annum. There were additional demands for support for children with SEN and disabilities, with approximately 700 young children with Statements of Educational Need. The number of adults requiring support in care homes had increased by 9% over 3 years and demand for care at home had increased by 2500 hours per week. This was an increase of 45% and an extra £1.5 million per annum. It was estimated that these two areas of care were equivalent to 14% of the net Council spend. In addition, the Care Act 2014, although welcome legislation, would have serious financial implications on the adult social care health agenda.
The Mayor estimated that the cost to the Council of managing the cuts was approximately £1 million per annum. Between 10% and 20% of management resources had been taken away from core service delivery to deal with the cuts. Council income was derived from four main sources which were: the Revenue Support Grant which at £70.3 million for 2014-2015 was 35% of the budget, Council Tax of £41.1 million, which was 21% of the budget, Business Rates amounted to £19.1 million, which was 10% of the budget, and Fees and Charges of £67.9 million which amounted to 34% of the budget.
Since the Revenue Support Grant was paid on per head of population it was vital to increase the Towns housing stock, thus increasing the number of residents in the town. It was proposed to build 7495 houses in Middlesbrough between 2012 and 2029 at an average of 440 properties per year. This would increase the number of residents and income from both the Revenue Support Grant and Council Tax.
With regard to the national financial position, the Mayor provided several examples of recent comments on state of the economy from members of the International Money Fund, the Office for National Statistics (ONS), the Bank of England and other think tanks including the Resolution Foundation.
The national debt was currently £1.299 trillion, with the public deficit for the first three months of this year £36.1 billion. The deficit had increased 7.3% from the same period last year. Based on these figures it was unlikely that fiscal targets for 2014-2015 would be met. According to the ONS the UK economy grew 0.8% in the second quarter of 2014 and was forecast to be one of the fastest growing economies in the G7. The BoE indicated that the UK economy would grow by 3.5% this year. However the BoE had also forecast the average wage rise for this year would be only 1.25%.
Construction accounted for 6% of economic activity in the UK and was performing better than previously predicted. The Service Sector grew by 1% in the second quarter and accounted for 78% of economic activity. It was now 3% above its previous peak in the first three months of 2008 according to ONS. In contrast, manufacturing was still 7.5% below its pre-recession peak. It was an accepted fact that for the economic recovery to be sustainable, exports must rise.
Any rise in interest rates had the potential to double the number of households with debt problems and it was estimated that 8.8 million adults had too much debt. It was also noted that oil prices were volatile, due mainly to the conflict in Iraq and any rise in inflation would impact directly on the Councils finances.
The Mayor summarised that public borrowing was not reducing, the national deficit was not under control, and deficit targets would not be met. Whilst the economy was growing, it was consumer led and therefore not sustainable. In addition, the possibility of increases in interest rates and inflation were a further risk to the recovery.
With regard to youth unemployment there were currently approximately 868,000 sixteen to twenty-four year olds out of work. Research indicated by The Princes Trust and HSBC Bank indicated that more than 40% of businesses were experiencing skills gaps and difficulty filling vacancies. It had been identified that the lack of skilled workers could act as a brake on the recovery. The construction industry had cited difficulty filling roles such as graduate civil engineers, quantity surveyors and electrical apprentices. There was a striking mismatch between the types of work young people were training for and the types of jobs available. For example, 94,000 young people were trained in beauty and hair for 18,000 available jobs and only 123,000 were trained in the construction and engineering sectors for 275,000 available jobs.
The Tees area was facing a significant challenge to replace 120,000 posts over the next ten years which would become vacant due to retirements or people moving away. In addition, research by the Tees Valley Forum indicated that the area also needed to grow 25,000 more jobs over the same period. The Mayor stated that he had every confidence in the towns seven secondary schools and would be discussing the skills agenda with Headteachers in the near future. Middlesbrough College, Teesside University, Tees Valley Unlimited, the Local Authority, as well as local businesses were also advancing the skills agenda.
Reference was made to the possibility of a move to a Combined Authority by October 2015. Local Authorities would relinquish a certain amount of power to one Combined Authority which would take the lead on strategic issues such as transport, regeneration and employment.
In conclusion, the Mayor stated that he would make a comprehensive statement about the skills agenda and would circulate a briefing note in advance for Members consideration.
Following the Mayors Statement, Members asked questions in relation to affordability of new housing, lack of progress in the Whinney Banks area, a proposal to sell land currently occupied by the Middlesbrough Golf Club, youth unemployment, and the Local Enterprise Partnership, to which the Mayor responded.