Peterborough City Council's latest budget report forecasts £5.2m overspend with 'fragile' reserves

The council's 'Budget Control Report' will be presented to cabinet on October 2 and gives an overview of the authority's financials at the end of the first quarter (June 30).

One of the key takeaways from the report is a forecast revenue budget overspend of £5.2 million by the year end, which the authority says reflects its "continued challenging" financial position.

The council's net revenue budget is £233 million.

According to the report, the overspend is being driven mainly by delays to delivering the council's ambitious savings programme, but also higher than estimated costs of borrowing.

If the council's predicted overspend materialised at the end of the financial year, the authority would be required to use the general fund to cover the overspend, taking the balance of this particular reserve to below £2 million.

The council's Dedicated Schools Grant (DSG) is also forecast to overspend by £9.7 million, which the authority said was due to growth in demand for Education Health Care Plans (EHCPs) and the resulting education provision.

"This overspend will result in a £13.3m DSG deficit at the end of 2025/26. At present the council is having to borrow to fund the DSG deficit at forecast a cost of c£0.6m per annum (based on current interest rates)," the report states.

The council’s reserves balances are in a "very fragile position" according to the report, taking them down to just under £18.3m (excluding the £13.3m DSG Deficit), of which £4.2m is ringfenced for specific use.

Steps are already being taken to rebuild these reserves, the council insists.

In terms of corporate performance during the first financial quarter, 34 per cent (27) of the council's key performance indicators (KPIs) did not meet their targets.

According to a cabinet report, areas requiring attention include a decrease in the timeliness of Education, Health and Care Plans (EHCPs), an increase in the numbers of children persistently absent from school, an increase in the numbers of long term (six months plus) empty homes, and increase in police recorded violent offences in the city centre.

A total of 53 per cent (41 out of 79) of the council's KPIs showed improvement compared to the baseline figures, while 30 per cent met or exceeded their targets.

'Light at the end of the tunnel'

Councillor Mohammed Jamil, cabinet member for finance and corporate governance at Peterborough City Council, said: "When the budget is set each February it is based on a number of assumptions, in particular around service demand and capital financing costs.

"As the year unfolds, when actual spend occurs and service demands materialise, service areas have the potential to overspend, particularly where we are seeing high demand such as children's social care and in relation to interest rates which impact our capital financing costs.

"The £5.2m overspend is a prediction of where we will be at year-end, it is not set in stone.

"We are working hard to reduce this by only spending money when it is absolutely necessary and by working hard to deliver the savings plans for the current year. It is vital that we do as any overspend will need to be met from reserves, our savings, which are already much lower than ideal.

"Next month we will launch our budget consultation for the new financial year which includes a commitment and a plan to rebuild our reserves. It will also set out how we plan to close a budget gap.

"One of the ways we will do this is by continuing to build on the successful approaches we have introduced in recent years, particularly in relation to reducing demand where possible.

"These remain very difficult times for our council, however there is light at the end of the tunnel with the government's Fairer Funding consultation, which looks to make funding for local councils much fairer, based on population and service demand."