Peterborough City Council forecasts £9m overspend as Covid-19 impacts finances

The council has currently forecast a £9.6m overspend on the 2020/21 budget and Cllr David Seaton, Member for Finance, told this week’s Cabinet meeting (September 21): “In May, June and July I brought reports to Cabinet that set out the implications of Covid-19.

“We track this on a weekly basis with regular updates and up to the end of August had total Covid-19 pressures of £34.8m.

“Taken against the £13m of funding the government has provided us with directly and ring-fenced funding of £10m, this leaves a forecast Covid-19 pressure of £11.8m.

“The deficit at the end of June was £14.1m, but our updated projection across all budgets showed the net overspend position to the end of July was actually £9.6m.

“This represents a £3m deterioration over the May position; but this is slightly better than the Covid-position due to timing differences, as the overall monitoring is done to the end of July, whereas Covid-19 figures are to the end of August.

“We must still continue to focus on two areas: firstly, our transformation work concentrating on finding offsetting savings, and secondly, continuing to lobby for additional Covid-19 funding to bridge any gap.

“On this latter point, our Finance Director meets regularly with his peer-group, we meet regularly with government, and our MPs continue to set out the case for Peterborough.

“But let’s be very clear – this pandemic is posing a huge financial challenge on all councils with particular concern about council tax and business rates which are showing 3.6% and 23.3% deductions year-on-year respectively.

“The updated, detailed analysis of the over and under-spending has been listed within the report, and there is significant uncertainty surrounding our ability to set a legal and balanced budget for 2021/22.

“The issues we’re grappling with include: difficulty to deliver current and future savings plans due to the councils’ local response to Covid-19; additional costs and reduced income generation within the current year; and the longer-term impacts on the council’s budget as a result of these pressures; diminishing of low-levels of reserves further eroding the council’s limited financial resilience; and future funding uncertainty which creates and additional layer of challenges when developing future strategic plans.

“These causes include the unknown impact of an economic recession, future Covid-19 waves, and response required at a local level and funding allocations from local government. I think it is worth saying that we’re not alone: many, many councils are in the same position and I think government is fully aware of that.

“The Ministry of Housing, Communities and Local Government (MHCLG) have confirmed that the local government provisional finance settlement will not be announced until the late fall and that too leaves us in an uncertain position.

“However, as a first step we must plan growth and savings proposals to go out to consultation in mid-October in order to be sure we can deliver fully those plans for 2021/22.

“The second phase of the budget after Christmas will be clearer, as MHCLG will have had time to consider in its provisional finance settlement the true position of the sector.

“We’ve also listed in the report the revised capital program and takes into account year-end slippage and additional schemes.

“The overall budget requirement for the year has reduced from £112m to £85m, but these changes need to be approved by Full Council.

“Our engagement with government remains critical and government is listening and understanding the challenges that we have.

“But our recovery and budgeting must move forward hand-in-hand, and I ask the Cabinet to note the report.”

Cllr Wayne Fitzgerald, Member for Adult Social Care, Health and Public Health, added: “Our message to the world, both locally and in wider circles is definitely getting through, because we’re not alone in this.

“But could you please explain to me why the present capital position budget has been reduced?”

Peter Carpenter, Acting CFO replied: “The adjustment accounts mostly for leases returns that have been taken out, accounting for approximately £22m, £7-8m of new schemes, and something like £14m of schemes that are not now going to happen or be delayed slightly; and all of that added up gives the net effect reduction you see.

“I think the biggest problem that we face in terms of our capital budget is spending the program because the problem up to the end of June-July was that very little of the schemes are actually allowed to go ahead due to Covid-19 restrictions.

“If we were to have another set of lockdowns, for example works on Town Hall north and the social-distancing we have to do there – we have a peak-period for that in November where lots of people are scheduled to be on-site – if further restrictions come into place there, that’ll delay that project which will then increase costs and delay that scheme even further.

“So, while it’s a bit ‘chicken and egg’ at the moment, we just need to be very mindful of the fact that we need to check the capital actuals on a month-by-month basis.”

Members of Cabinet noted the report.