Council budget: Targeting support to make things fairer

All Councils must set the budget every year. Setting the budget is one of the most challenging but important tasks the Council has.

Every year, Council workers suggest budget ideas for the Council's ruling Cabinet to consider.

The borough's 20-year vision and goals guide our budget planning.

The ruling Cabinet check that we focus our resources and support on the residents and areas that need it most to reduce inequalities and make things fairer.

Our 20-year vision for South Tyneside is - A place where people live healthy, happy, and fulfilled lives.

We have five main goals to achieve this:

• Financially secure: Residents will have enough money for a good standard of living.
• Health and wellbeing: Residents will enjoy good mental and physical health throughout their lives.
• Connected to jobs: Residents will have access to good quality jobs and the skills to get them.
• Part of strong communities: Residents will live in clean, green, and safe communities.
• Targeting support to make things fairer: We will help those who need it most to reduce inequalities.

All budget ideas are reviewed, and the final choices are made by the ruling Cabinet.

These are then included in the financial plan presented in February each year.

Opposition parties can suggest their own budget ideas for the Council to consider.

The Medium-Term Financial Plan shows how we focus our resources on the biggest issues facing residents while continuing to provide everyday services, like:

• supporting those in need
• maintaining highways
• keeping parks and beaches clean

Medium-Term Financial Plan consultations

The Medium-Term Financial Plan has been put together using evidence, insights, and feedback from the people of the borough.

When needed, we will consult with those affected by specific proposals.

In January 2025, we held budget consultation meetings with:

• the voluntary sector
• businesses
• opposition members
• the Overview and Scrutiny select committee

We also have regular meetings with trade unions.

Most savings proposals, like removing vacant posts or generating income, can be done with little or no impact on the wider community.

The Council has two main types of budgets:

• one for long-term investments (capital investment)
• one for everyday expenses (revenue)

The Council's capital investment budget is £171 million till 2030.

The Council's revenue budget for 2025 / 26 is £162 million.

Unlike other public bodies, local Councils cannot spend more money than they have. They must balance their budgets.

If the government reduces funding, Councils need to cut spending or increase income, like raising Council tax and fees.

If Councils can't balance their budgets

If Councils can't balance their budgets, the government will step in and do it for them, which might not consider local needs or priorities.

This has happened to Councils such as Birmingham and Thurrock Council. The government stepped in after they declared they could not set a balanced budget, which led to cuts in frontline public services to their residents.

Capital funding is money that the government sets aside for big projects.

The government sets strict rules on how capital funding can be used.

It can't be spent on everyday services but can be used for things like:

• maintaining roads
• public buildings
• schools
• leisure facilities
• regeneration projects like new public buildings and social housing

The Council focuses capital investment on projects that support the borough's 20-year vision and future needs. This make sure that future generations have the necessary facilities.

We have successfully managed to get millions in external funding, including £20 million for Holborn Riverside and £20 million for Jarrow.

The borough has also been named a Community Regeneration Partnership area.

Revenue spending covers the day-to-day running costs of Council services, such as:

• refuse collection and recycling
• highways, parking, and street cleaning
• environmental health
• parks, recreation, community facilities, and libraries
• schools, education, and pupil support
• care for vulnerable adults and older people
• children's social care, fostering, and adoption
• benefits advice and administration
• public health services like health visitors for new mothers and drug and alcohol treatment
• local transport services

More than 70% of the Council's discretionary budget, which is money we can choose how to spend, goes towards helping vulnerable adults and children.

The amount of money each Council has to spend depends on several factors, including:

• Government grant
• Council Tax base (South Tyneside has one of the lowest in the country)
• Council Tax level
• Number of new homes built
• Business Rate retention
• Attracting external funding for projects
• Fees and charges

South Tyneside has faced one of the biggest cuts in government funding in the country, forcing the Council to significantly reduce spending since 2010.

In 2025 / 26, the Council will receive 37% of its income from the government and 63% from:

• Council tax
• taxes paid by local businesses (retained business rates)
• savings (reserves)

Due to past funding cuts and higher demand, Councils now depend more on local taxes for their funding.

Government funding has reduced by 51% since 2010. Getting money for only one year at a time makes it very hard to plan long-term services and finances.

The new government has announced it intends to change the way Councils get funding, including:

• providing funding based on needs and deprivation
• change business rates
• start giving money for several years at a time from 2026/27

Further details on these announcements are expected in summer 2025.

External funding

We look for external funding sources to help pay for big projects.

The Council has successfully managed to get funding from the government, including £20 million for Holborn Riverside and another £20 million for Jarrow from the Plan for Neighbourhoods.

We've also managed to get funds such as:

• the UK Shared Prosperity Fund
• Arts Council funding
• support for renewable energy projects

We keep trying to get more funding to bring big changes to South Tyneside.

Working with regional partners, the £4.2 billion devolution deal for the North East gives us important decision-making powers and investment. This helps us make decisions that fit local needs and invest in projects that benefit our residents, communities, and local economy.

We're taking every chance to get extra investment beyond our core funding.

The devolution deal's commitments to building better homes, investing in jobs and skills, transport, and moving towards net zero are key to addressing inequalities in our society.

The Council borrows money very carefully and follows strict rules. We only borrow for big projects, not for everyday services.

In the past, we borrowed money at low, fixed interest rates to invest in long-term projects. These investments were made to create valuable assets, like buildings and infrastructure, that will benefit future generations.

South Tyneside has over £1.3 billion in assets and the second highest net asset value per person in Tyne and Wear.

Our Medium-Term Financial Plan makes sure that any borrowing is sensible, affordable, and sustainable.

Often, these investments generate income that helps cover the borrowing costs. For example, our leisure memberships have grown due to investments in our leisure facilities.

With higher interest rates now, we are borrowing less and using more external funding for big projects.

South Tyneside has successfully secured millions from the government for town centre investments, showing our growth potential.

The Council expects that the percentage of the budget spent on debt will decrease from 18.2% in 2020/21 to 14.3% by 2029/30.

This shows the Council's commitment to reducing borrowing and taking a careful approach.

We follow strict rules (the prudential code) to make sure any new borrowing is affordable. Each year, we review the borrowing for big projects.

In the past, we used borrowing to fund important projects such as:

• regeneration schemes
• housing
• leisure facilities
• schools
• highways
• footpaths
• transport schemes

These investments also helped increase the Council's income.

Having low-rate, long-term loans will benefit future leaders by putting them in a strong financial position.

Reserves are savings that the Council keeps for emergencies or unexpected costs. They act as a safety net when the Council faces financial pressures or budget changes.

Some of these reserves are set aside for future expenses.

We sometimes use these savings to balance our budget, but we need to keep a certain amount for known risks, planned projects, and unexpected emergencies.

If we use most of our savings, we may find it difficult if there are unexpected costs, like rising inflation. It also:

• doesn't solve our budget problems long-term
• could lead to future service cuts
• might result in the Government stepping in

The Council faces big challenges, including:

• more people needing care and more complex care needs
• new laws and regulations
• issues with hiring and keeping staff

Like everyone else, the Council is dealing with rising costs and demand. Costs have at least doubled due to:

• inflation
• staffing
• cost of care
• contracts
• increased demand in adult and children's social care
• higher energy prices

Savings and cuts

Since 2010, South Tyneside Council has saved £208 million and will need to save more money in the future, including:

• £13 million in 2025 / 26
• £29.8 million by 2030 to stay financially stable

We have plans to:

• cut spending and work more efficiently across all services
• look at ways to generate more income
• reduce spending on support functions to protect frontline services

There are no major service cuts planned. Instead, we are investing in prevention and areas that will save money in the long run, like adult and children's social care accommodation.

Our transformation work focuses on four key areas:

• Prevention
• Commercial opportunities
• Modernising the council
• Using evidence and engagement

We are focusing support on the residents and areas that need it most to reduce inequalities and make things fairer.

Every year, we review the budget to keep services accessible and cover rising costs. We try to keep subsidies for those who need them most.

We take a balanced approach to setting fees and charges with the need to support vulnerable people in our community, especially in adult and children's social care, which takes up a large part of the budget.

We try to keep costs low for people who are having money problems and continue to help with many services by giving financial support.

Section 114

We've seen in the news that many Councils are struggling or in difficult situations and issue section 114 notices.

A Section 114 notice is when Councils expect their spending to be more than their income for a financial year, which is not allowed under the 1988 Act.

South Tyneside Council is not in that situation. Despite some pressures this year, we are taking steps through our Medium-Term Financial Plan (MTFP) to reduce costs and increase income while investing in important services and assets.

We will continue to be careful with our financial planning.

The budget includes a 4.95% increase in Council Tax for 2025 / 26.

This increase is partly due to the Government's adult social care levy, which is specifically for social care services, and partly due to a general rise in Council tax.

2% of the increase is for the adult social care levy.

Even with this increase, we believe our Council tax should still be the 4th lowest out of 12 councils in the North East.

For most households (Band A), this increase means paying about £1.22 more per week. The new local council tax support scheme started in 2024, helping around 12,500 households pay less council tax, showing our commitment to fairness.

Like everyone else, the Council faces rising costs and demand and we can't spend more money than we have (know as a deficit).

If we don't increase our income, we might have to reduce or stop important services that people need.

The Council tax bill also includes charges from other services like police and fire departments. You could think of it as a borough tax, not just Council tax, as the money you pay goes to a range of public and emergency services, not just the Council.

The Council tax increase for Northumbria Police is £9.33 a year for Band A properties, and for Tyne and Wear Fire services, it's £3.33 a year for Band A properties.

We plan to increase rent by 2.7% following government guidelines. We'll carefully use our savings to support the Housing Capital Programme.

South Tyneside has the lowest rents in Tyne & Wear, and Council housing rents are much cheaper than private sector rents.

Local Councils in the region are also raising rents by 2.7% to help with management, maintenance, and housing projects.

We're investing £29.5 million each year for the next 5 years in our Housing Capital Programme, which will make sure that tenants homes continue to meet decent homes standards 

We're also building up to 46 new homes over the next 3 years to provide more affordable housing in the area.

We commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) in 2022 to do a review of the Council's financial management

They confirmed the organisation as having "adequate financial management capability."

The assessment places the Council with the majority of Councils that have done a similar review.

External challenge is part of 'Our Council's' new evidence-based way of working to measure successes and areas for growth.

The Council has made several planned investments and improvements based on an action plan agreed after the CIPFA review. This is to improve the financial management skills and abilities within the organisation.