Peterborough City Council 'far from out of the woods' despite £4.5m underspend in last financial year

Peterborough City Council began the financial year with a £27m gap in its finances.

By Ben Jones
Monday, 13th June 2022, 6:00 pm
Peterborough town hall.
Peterborough town hall.

A financial report to be discussed by city council’s cabinet shows that the council ended 2021/22 with a £4.5million underspend – however members will be advised that the authority's financial challenges remain.

The news will be welcomed by cabinet members at the meeting on Monday 20 June, with the underspend bolstering the council’s reserves and is a positive first step in line with the Improvement Plan which was approved by Full Council in December and looks to achieve financial sustainability.

However, in the report the council’s finance director Cecilie Booth warns that the city council still has a long way to go. She urges continued focus and discipline to deliver the Improvement Plan and the proposals set out in the 2022/23 budget and cautions that Covid has to some extent masked the true financial position due to government grants which have supported activities and delays in delivering some schemes and projects.

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The report reads: “The final £4.5m underspend is a positive first step for the council on delivering its core priority of financial sustainability. However, the savings identified in the 2022/23 tactical budget require focus to ensure delivery at the same time as identifying opportunities to deliver financial sustainability over the medium to long term. The financial operating context for the council remains highly challenging with new uncertainties and risks creating additional pressures such as the exposure to inflation risk. The council must continue to challenge itself on how every penny of its money is spent.”

The council began the 2021/22 financial year with plans to use a £13.7million capitalisation direction approved by Government to balance its budget. Last summer, the council changed its approach and committed to solving its financial challenges without external support, thereby using reserves to balance its budget at year-end. The council committed to reducing its spending as much as possible to minimise using its reserves, including placing a freeze on all non-essential spending in November. The authority also paused several capital investment schemes.

However, some of the savings made were one-offs, for example vacancies that could not be filled and social care demand we expected to receive last year but is only happening now in the current financial year. These will all place additional pressures on the council in 2022/23, as well as the rising cost of inflation which is impacting every authority.

Councillor Andy Coles, cabinet member for finance, said: “This report shows that we are moving in the right direction towards becoming a more financially stable council and that is great news.

“Ending the financial year with a £4.5m underspend has given us additional funds to invest in transformational change to our services which will support our goal of achieving financial stability. It also helps us guard against extra inflation costs, higher energy bills, more unmet need.

“I must pay credit to our staff who managed to deliver significant savings from the point we put a freeze on all but essential spending. Many of them have come forward with their own suggestions to make savings and we are looking at those.

“However, as the report from our finance director says, although we are on the right path, we are far from out of the woods. We are already seeing evidence of issues we had budgeted for in the last financial year coming through now and the impact of rising inflation will be felt, so it is important we don’t weaken our resolve to achieve financial stability and continue to deliver the savings we have identified. Part of that will include transforming our services so that they are meeting the needs of our residents but also supporting our goal of becoming financially sustainable.”

The £4.5million underspend has enabled the council to increase its general reserve balance by £1.3m to £7.3m, a positive step as it increases the amount of money the council has for unforeseen events.

An additional £3.2m has also been added to an inflation reserve which now stands at £4.7m, established to mitigate the financial risk resulting from rising rates of inflation. In March 2022 inflation rates reached 7%, with the Bank of England reporting that it expects rates to peak at over 10% by the end of the year, the highest rate since 1982.

To read the report in full visit here.