Large drop in Peterborough council reserves as it battles financial crisis

More than half of the reserves currently held by Peterborough City Council will be used to help it tackle its financial crisis.

By Joel Lamy
Tuesday, 24th November 2020, 4:15 am

The council has seen its government funding reduced by more than 70 per cent (£58 million) since 2013/14 despite Peterborough being one of the UK’s fastest growing cities - a situation further exacerbated by the coronavirus pandemic.

Currently, the authority is preparing to make savings of £36 million to balance its 2021/22 budget - which it is legally required to do - as it awaits news of whether it will receive further government assistance.

So far, the council has outlined plans to tackle £2.7 million of the deficit, which includes a rise in the charge to collect brown bins for garden waste from £45 a year to £50 and the switching off of some lights between midnight and 5am.

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Peterborough Town Hall in Bridge Street

The council is also preparing to slash its budget for reserves to help plug its financial gap.

According to its latest forecast, the level of reserves is expected to drop from £32.575 million to £14.053 million over the course of the current financial year.

And the monetary struggles are not expected to end any time soon, with cabinet member for finance Cllr David Seaton saying last month: “The scale of the challenge next year will require additional funding and solutions as we cannot meet the deficit by savings alone.”

The council is currently in discussions with the Government over its financial situation and has proposed solutions such as:

. Providing additional funding for “exceptional” Covid-19 incurred costs

. Allowing the council powers to use debt financing to cover one-off Covid-19 issues in 2020/21

. Allowing the council to take a one-year holiday in 2021/22 on re-paying its loans, saving £15 million

. Allowing the council to take a one-year holiday on Pension Fund payments which would “have no impact on staff pensions currently or in the future, but would free up in the region of £6-8 million”.

Council corporate director for resources Peter Carpenter said in October the authority had been hit by £38.9 million of Covid-19 pressures and had so far received £27.9 million of government support.

However, he warned that “without additional funding this gap will deplete reserves to an unsustainable level”.

The council currently has three types of reserves: a general fund (for “unexpected circumstances”), ‘usable reserves’ (money set aside for specific projects) and ‘ring-fenced reserves’ (which can only legally be used for specific purposes).

According to its forecast, the general fund will rise from £5.1 million to £6 million over the 12 month period to April, while ring-fenced reserves will rise from £4 million to £4.4 million.

However, the level of usable reserves is expected to reduce from £23.4 million to £3.6 million.

Cllr Seaton said: “Although we have generated many millions by redesigning services, renegotiating our contracts and increasing our income potential, we have also had to dip into our reserves to be able to balance our budget, both in year and when setting budgets for future years.

“In common with many councils, this financial year has been the most difficult we have ever faced, with the pandemic compounding our financial situation. Not only have we had to provide far more services, we have also lost income in so many areas - for example £2.4 million in parking revenue and a business rates deficit of £7.2 million resulting from businesses being unable to pay.

“As a result, we will need to use some of our reserves in 2020/21 to be able to finish the year in the black. We appreciate this will leave our overall level of reserves low, however, we continue our discussions with the Ministry of Housing, Communities and Local Government (MHCLG) about potential solutions to the financial situation that we face. The outcome of these discussions will be crucial to our second phase of proposals and being able to deliver a balanced budget next year.”