Concerns raised over ongoing use of Northumberland council's financial reserves

The council has pressed ahead with an ambitious capital programme that includes the construction of new schools across the county despite spiralling costs due to inflation.

While that capital programme is set to wind down in the coming years, more than £337m is currently identified in the 2024/25 draft capital programme.

Draft proposals show the council is set to use almost £25m of reserves in the next financial year.

Speaking at Tuesday’s meeting of the Tynedale Local Area Committee, Green councillor Nick Morphet quizzed the council’s deputy leader Richard Wearmouth on this spend.

Humshaugh’s Cllr Morphet said: “I am worried about the rate we are using up our reserves. If we continue to use reserves, it seems to me we’re going to use them all up by late 2028.

“Does that worry you? Or are you leaving it for the next administration?”

The next county council elections are due to take place in May next year.

However, Cllr Wearmouth insisted the current Conservative administration had a financial plan.

He argued that the previous Labour administration had pursued an economic policy that consisted of them buying “stuff” via the council’s former development company Arch, taking on debt to do so and then using income from its property to increase income while paying off the interest of the debt.

Cllr Wearmouth said that while the outcome of this would never be known, similar policies had led to councils going bankrupt, such as Thurrock and Croydon.

However, many councils are currently facing financial issues – the Guardian reported that one in five council leaders have warned their authorities could go bankrupt within the next 15 months, following a 40% fall in their real-term funding from Government between 2010 and 2020.

Cllr Wearmouth continued: “In the short term, we need to spend some of our reserves to square a revenue gap that will slowly but surely correct itself. We have spent when we needed to, for example on the Northumberland Line and around Government programmes where an element of matched funding was required, as well as in our schools.

“After that, we can start to come to a more normal time, where we don’t have that big capital programme and we can start bringing down debt and get more typical revenue.

“I feel very confident that we have a good future. We have done an awful lot of good work together and we all have to consolidate.”

Draft budget documents show the council’s capital spend dropping significantly, down to £48.5m by 2027/28. Last year’s budget said that the total amount in the council’s reserve budget was £42.85m, which was expected to fall to £35m by the end of March 2027.

Documents detailing the current level of reserves will be published alongside the draft budget later this month, when councillors will have the opportunity to scrutinise it at an all-member meeting of the corporate services and economic growth scrutiny committee.

The final budget will then go before full council in February to be approved.