Councils struggle with redundancy funds

Following announced public sector cuts, local authorities are concerned that they won’t have enough money to pay for the redundancies that they are offering staff in order to reduce their headcount and cut costs.

Previously councils could borrow money for such payments, but due to stringent lending rules most of the cash will have to come from existing budgets and just £200m will be available.

With some well-paid long-term members of staff liable for payments of up to 50 weeks’ worth of pay when they take voluntary redundancy, councils will have to shell out hundreds of thousands of pounds this year and next with the aim of making savings in the years ahead.

South Tyneside Council, for example, has announced that 1,200 jobs will go over the next four years but leader Iain Malcolm said: “The government has made a limited amount [of funds] available through the spending review to allow redundancy payments to be capitalised and financed over a period of years. The council is concerned that the sums set aside are insufficient to deal with future anticipated costs.”

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