510 jobs will be cut to ease council tax; Labour says vital services will suffer.

Byline: Adrian Pearson Regional Affairs Correspondent

ACITY funding crisis has prompted Newcastle Council bosses to axe 510 jobs. Councillors have blamed the Government for forcing them to find pounds 20m in savings.

It comes after ministers handed councils one of the lowest cash settlements in a decade.

The council expects to make 270 managers redundant as part of the restructuring and will lose 125 admin staff.

Car journeys will also be limited as the authority looks to save pounds 800,000 on its transport costs.

Council boss John Shipley recently wrote to the Government urging ministers to help the authority avoid the largest funding crisis in the city's history.

He said: "Protecting frontline services is our top priority in making these changes, and we're also committed to handling job reductions sensitively so we can minimise and where possible avoid having a negative impact on our hardworking and dedicated staff.

"Finding pounds 20m in efficiency savings will be tremendously challenging, but it is absolutely the right thing to do.

"As well as saving money, these changes will lead to real and important service improvements in some areas, not least in better supporting people who need care in their own homes to help them gain more independence.

"It will also help the council meet its promise to keep council tax increases at or below inflation."

The council aims to save pounds 3.7m on the pounds 400m it spends on goods, products and services, including telecommunications, printing, computer hardware and agency staffing.

Labour group leader Nick Forbes has predicted the council will not be able to make the savings without harming frontline services.

He said: "We know the council will make redundancies in some local services, and you only have to look at these cuts to see there will be an impact on the services people depend on. Senior management has been a growth industry under the Lib Dems, but by the look of today's announcement it will be the junior and middle level positions going.

"This should be a concern because these are the positions closer to the public and more likely to have a noticeable impact on the public service."

The council insists many of the positions are already vacant and bosses hope to achieve the job cuts without compulsory redundancies.

Acting chief executive Barry Rowland said: "This is simply the right thing to do, but is doubly important now we face a budget gap next year of pounds 20m due to a low Government grant increase, growing demand on services and increased costs and reduced income due to the economic downturn. By being more efficient behind the scenes, the public will notice a real difference, for example in having their calls answered more quickly, or through having to fill in fewer forms. "

Unison Newcastle branch secretary Kenny Bell said the union was seeking a pledge from the city council that nobody would suffer compulsory redundancy.

INDUSTRY RESCUE

THE Bush administration yesterday said it was ready to step in to prevent the US car industry from collapsing after the Senate refused to pass a rescue bill endorsed by President George Bush and congressional Democrats.

Most obvious source of help is the Wall Street bail-out fund.

White House press secretary Dana Perino said. "The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry."

Treasury spokeswoman Brookly McLaughlin said: "Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry. "

The Wall Street bail-out fund is one of the few remaining options for General Motors and Chrysler, which have said they could run out of cash in weeks.

Mr Bush had originally refused to use the fund to help the car makers, insisting that help come from Congress. But the White House said it must reconsider after the Senate failed to agree on a EUR14bn (pounds 9.3bn) rescue.

About EUR15bn (pounds 10bn) from the first half of the EUR700bn (pounds 469bn) financial bailout is uncommitted.

The Treasury in the past two months has pumped out about EUR335bn (pounds 224bn) to banks and insurance companies. To begin tapping the second half of the bail-out, the administration would first have to notify Congress, which could block it or put new conditions on how the money was used.

General Motors said it was encouraged by the White House's willingness to consider other options. The company said it would work closely with the administration on solutions "that could prevent further damage to our nation's economy".

Detroit's car makers employ nearly 250,000 people and more than 730,000 others produce materials and parts for cars. If one car maker declared bankruptcy, some say three million US jobs could be lost.

CAPTION(S):

CHALLENGE John Shipley.; U-TURN President George Bush plans a car rescue.