STEPHEN LEWIS talks to York council leader Steve Galloway about plugging the city's financial black hole.

THE honeymoon is well and truly over for York's ruling Liberal Democrats.

First there were the revelations that the City of York Council's pension fund was massively in the red, along with those of councils and businesses up and down the country. The deficit, in York's case, is a staggering £77million.

Then came the rejection of the Coppergate Riverside scheme - which, had it gone ahead, could have been a cash cow for the city. And finally, at the end of what have been an eventful few days, came further revelations of a budget black hole of up to £8.4million staring the council in the face.

Council leader Steve Galloway can be forgiven for looking a little frazzled. Perhaps he's beginning to realise that this business of running a city council isn't so easy after all.

Not that he would admit as much. "As far as I'm concerned, the job is much as I expected," he says grimly.

Faced with the prospect of a budget shortfall for next year alone of between £5.6million and £8.4million - a 'best case' and 'worst case' scenario - his response seems to have been to ask the rate-paying citizens of York to help him find ways of balancing the books, by suggesting areas of council operations where waste, duplication and unnecessary expenditure can be cut.

He's not, he insists, seeking to throw responsibility for the city's finances on to the shoulders of ratepayers.

"At the end of the day, I totally accept that it is the responsibility of the council to come up with a balanced budget," he says.

But there is nothing wrong in asking for ratepayers' input. In a sense, he claims, it will mean bringing a little 'consumer power' to the people of York. "Residents do know whether many street-level services are provided as frequently as necessary, or more frequently than necessary in their area," he says.

"They have as good an input to make on that as anyone."

Asking residents for their views on where cutbacks and savings could be made is only part of the process, he stresses.

He can't avoid a swipe at the previous administration. Perhaps if Labour had been more "provident" with finances in the past, the council wouldn't be faced with such a large deficit now.

Under the Liberal Democrats the council has already carried out a thorough review of its finances - a process, he says, which has identified, among other problems, a long-term history of under investment in the maintenance of roads and buildings, which is going to have to be paid for in future.

He accepts, however, that much of the black hole the council faces now comes from factors beyond its control. These include the need to invest more in pensions as a result of the pensions fund crisis.

This was caused in part by the depressed stock market as well as by past underpayment by both the council and Government.

There is also an anticipated shortfall of £2.3m in the funding allocated to York to boost standards in schools that are comparatively underachieving.

In an attempt to get to grips with council funding in the future, Coun Galloway says the city council will work on the basis of a three-year 'rolling' budget, so that it is always attempting to plan ahead.

To get on top of the immediate crisis, he is proposing what amounts to a four-pronged approach.

Yes, York citizens will, through ward committees, be asked to suggest ways in which the council can save money. The council's 4,000-plus members of staff will also be asked to identify areas of waste and duplication.

Then the council will be approaching local MPs to ask them to lobby central government on York's behalf for a 'fairer deal' when it comes to allocating grant.

Finally, he intends to undertake a root-and-branch scrutiny of every service the council provides. He calls it a "zero-based budget exercise", and the idea is to examine in minute detail everything the council does, to see whether it is justified.

"There will be no sacred cows," he says. "We will look in every cupboard."

He refuses to rule out job cuts. It's not something he wants to do - and so far economies have been achieved by "natural wastage". But more than 70 per cent of council expenditure goes on salaries - so if cuts do have to be made, some jobs may have to be looked at.

All the more reason for council staff to co-operate in finding ways to make efficiency savings that won't involve job losses.

Updated: 11:56 Tuesday, September 16, 2003