January 7, 2009 9:21 PM

Millions of pounds look set to be spent on Newcastle's communities during the economic crisis.

The Lib Dem-run city council plans to invest £21 million into energy efficiency, regeneration and boosting the economy.

The cash will be borrowed, but council tax will still have to go up by 2.9% to cover the loan, meaning a rise of 65p per week for a family living in a Band D household.

The Lib Dem council leaders are sticking to their pledge to keep the rise below the rate of inflation for the fifth year running - even though the amount Newcastle has been given by the Government has increased by only 1.75%, the joint lowest in the country.

The three-year investment will secure jobs in the face of the credit crunch.

Councillor Peter Allen, executive member for resources, said: "We've kept to our original election pledge when we took control of the council - bills down at or below the rate of inflation - and we're now delivering for the fifth year running.

"At the same time we've invested extra in the services people have told us are most important to them, such as our hugely popular rapid response teams, improving the environment in every ward round the city.

"We've achieved all this because we run an efficient operation, and we'll be tightening our belts further next year to the tune of £20 million plus, whilst still protecting frontline services."

The council is saving around £20 million by cutting 500 posts - many of them managers and administrative staff. Front line jobs will be protected.

The £21m investment will be spent on projects people in the city have raised as a priority, including:

:: £7m extra spending on road and pavement repairs and improvements.

:: £1.4m extra on grants for disabled facilities to make improvements in people's homes.

:: £75,000 extra on Newcastle WarmZone, helping those facing fuel poverty.

:: £800,000 extra on works at Walker Quay.

:: £4m extra in a new regeneration fund to support various schemes across Newcastle.

By using local external contractors for building work, jobs will be secured and no manpower will be taken away from frontline services.

A scheme to help low-income first-time buyers with shared equity loans and cash from the Government and developers is on the cards, and more staff to help homeowners avoid repossessions.

The council is also pledging to work with developers to help them out as the demand for homes drops, to increase the amount of affordable social housing in the city and to offer support packages for small businesses.

Council leader John Shipley said: "As well as keeping council tax bills down, and protecting frontline services, there is much that the council can do to help businesses and individuals survive the economic recession.

"Our budget proposals includes an extra £21 million of spending on infrastructure and regeneration projects - which will help keep many people in work in the construction industry locally.

"We're also continuing with a package of interventions to help people in debt crisis, to help housebuilders and homebuyers alike, and to help small businesses.

"Without this extra spending package, our council tax bills would have been even lower, but we think that supporting the city's economy through this crisis is simply the right thing to do."

The council's draft budget proposals will go out for consultation before being put to councillors in March.