Reserves of �25m will foot council job loss bill

UP TO �25 million of council savings are set to be put aside to pay for staff redundancies.

Stoke-on-Trent City Council wants to use the cash from its earmarked reserves to fund its redundancy and reorganisation programme.

Cabinet members are expected to approve the plan at a meeting on Thursday.

Estimates show that redundancies at the authority in 2010/11 are expected to cost �10 million, although the exact figure is not yet known. The council will also have to settle pension costs of �3.5 million, as well as �7.3 million of historical pension liabilities from previous redundancy programmes.

The Sentinel revealed last year how the council needed to cut up to 713 jobs as it tackled a �32 million funding deficit.

But the situation deteriorated and by the end of January, 764 workers had agreed to leave the council. Latest figures show 1,102 workers have expressed an interest in voluntary redundancy.

A report due to be considered by the cabinet says once the redundancy payments are made, the reduction in staff will save the authority an estimated �25 million a year.

If cabinet approves the plan, the council's director of business services will borrow the money needed from its �61.5 million of reserves and then pay it back over five years starting in 2011/12. By borrowing the money from its savings instead of taking out a loan, the council will save itself from having to pay an estimated �1.2 million in interest charges.

Councillor Kieran Clarke, below, cabinet member for resources, performance and governance, said: "If this was a perfect world, we wouldn't be in the mess we are in. Ideally you want to make people redundant in August or September at the latest so the savings you would make would cover the redundancy costs.

"But because of the settlement we got from the Government there isn't a chance of doing that. So it is a question of where do we get the money."

He said: "It is like dipping into the tin you keep to pay the electricity to pay the milkman. It is fine so long as you can put the money back before you have to pay the electricity bill."

He said the council could not simply spend its reserves on the redundancy payments or keeping services open as most of it is earmarked.

Mr Clarke said: "Some we have to keep for insurance claims, but the biggest amount of reserves are earmarked for private finance initiatives for schools. The Government gave us the money for the schools up front but every year we have to give some of it to the PFI provider to pay for the buildings to be maintained.

"So while we know we can use some of this money now, we have to make sure we put it back."

Although the cabinet is expected to approve the potential release of �25 million of reserves, it is thought the actual amount borrowed will be �17 million.

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