Newcastle City Council’s Finances

Much has been made by the Lord Mayor Jeff McCloy about the current state of Newcastle City Council’s financial position. He refused to sign off on the Council’s latest financial statement and forwarded 24 questions that he wanted answered before he would sign off on the council’s projected expenditure. Councillor McCloy took the opportunity of his first financial sign-off to attack some current practices of the council as “bizarre”, to threaten significant staff cuts and opening up council services to tender.

But just how serious is the current financial situation of Newcastle City Council? A close reading of the Council’s most recent financial statement offers little justification for the Lord Mayor’s response of alarm. Newcastle City Council’s 2011/12 budget balanced all planned expenditure against projected income. The deficit of roughly $23 million revealed in the statement occurred because of two factors. The first is an accounting measure where $11milion worth of capital grants that the council has received are removed from income since they are grants targeted for specific purposes. The second is that Council revenue did not reach planned levels largely because of a drop in receipts for council services such as for waste disposal at Summerhill depot.  The underlying deficit then is $12 million, amounting to a deficit of 5.9% of the overall budget.

So where does this place the financial position of Newcastle City Council? The year-to-year budgeting of councils such as Newcastle involves making predictions about income and expenditure that are inexact by their nature. According to a recent review by the Independent Pricing and Regulatory Tribunal (IPART) suggests that an appropriate range for financial sustainability for a council is somewhere between +5% and -10%. Newcastle Council’s budget falls well within this range. To sum up, the Lord Mayor has built an atmosphere of financial crisis where there is none.

Newcastle Council’s current deficit is similar to that of many other councils of its size. While it is important for Council to get it financial affairs in order, it is equally important that any review of council services and employment practices is conducted in a calm and considered manner, in an atmosphere that is free from presumptions about how Council’s financial position might be made more sustainable and steady. It is not helpful for the morale of staff and the healthy functioning of our council if there are overt threats of wholesale privatisation of council services and functions made through the local media. We owe it to our wider community and to the council’s staff to conduct our deliberations calmly, taking into account all the implications of our planned actions.

Newcastle City Council, like all councils in NSW, has a charter of obligations under various acts of the NSW Government that it must fulfil. The familiar services provided by Council include rubbish collection, local road construction and maintenance, the provision of sporting fields and recreational parks, swimming pools, libraries and civic amenities such as galleries and meeting halls. Because councils represent the sphere of government closest to the people, they are in the best position to oversee the most equitable provision of services to children, young people and the elderly.
Council needs to consider how it can continue to answer these important social needs, while also providing our fundamental services efficiently and well.

Should Newcastle City rush to contract out Council services to the private sector? The experiences of other councils indicate that privatisation is not the panacea that Lord Mayor Jeff McCloy might have us believe. Newcastle City Council is not a business and should not operate as a business. It is a sphere of government with the fundamental responsibility of providing services to its residents. Historically our council has acquired a large inventory of assets in its plant, equipment, buildings, roads and bridges. Even more importantly, it has built up expertise and historic knowledge among its staff. Notwithstanding the clear need to develop new efficiencies, that can and should happen while retaining the invaluable assets we have, both in the physical assets and in our personnel.

Council services exist to serve the residents of Newcastle, not to make a profit for private interest. Wherever services are let out to private contractors, we know that the fundamental aim of those contractors is to make a profit. Private contractors may at times offer services at a cheaper price than Council can provide. They are often able to offer cheaper services because they use more efficient equipment, pay lower wages or employ work practices that reduce staff numbers. We need to ask ourselves whether these practices amount to real efficiencies in the longterm for Council.

If updated equipment is what we need we could well be better off making wise investments now. If we need to make efficiencies in work practices, that can and should be negotiated with our workforce. Cuts in staff numbers should be carried out only with careful consideration and consultation with relevant employee representatives.

What our council badly needs right now is leadership that has the best interests of the city and all its people at heart, not some chimerical quick-fix solution that benefits only the big end of town.

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