Peterborough City Council's budget gap falling but still expected to top £15 million in 2025 due to inflation

Peterborough City Council has begun work on cutting its budget gap but inflation is still expected to keep it at over £15m in four years’ time.

As a result of having to cut its budget so severely, the council has already announced that it will be entering a period of “permanent austerity.”

In the current financial year, the council had a budget gap of £27m to close. A balanced budget has been passed but the council has said that “much hard work remains to be able to deliver all those savings in the current year.”

The council currently predicts that it will end the 2021/22 period with an underspend of around £4m, which will improve its financial reserves.

To balance the budget for the 2022/23 financial year, however, the council will have to find £16.673m worth of savings as part of its agreed savings plan.

As of May, £7.972m of these had been made but the council regards £0.83 of the remaining £8,701m as unlikely to be achieved, with a further £3.93 regarded as high right.

A report from the Peterborough City Council Independent Improvement and Assurance Panel rated 28 percent of identified savings proposals as being at least high risk.

In the following years, council modelling estimates that the budget gap will be around £9.5m in 2023/24- having previously been £5m before inflation began to rise sharply.

This gap is expected to rise to £12.9m in 2024/25 and £15.1m in 2025/26.

In response to the independent report, the council has said: “We are driving forward savings proposals in the current year and developing plans to meet the £9.5m forecast budget gap in 2023/24 rising to £15.1m by 2025/26.

"This will require input from all levels of the organisation. Over the summer months, we will further tighten the governance and reporting for our savings programme and will bring back an update in due course.

"We ended the last financial year with a £4.5m underspend which 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 we have for unforeseen events and helps strengthen our financial resilience.

“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.

“However, these reserves are one-off funds and can help in the short term, but ultimately we should be better managing our increasing pressures so we don’t need to use reserves.”

Peterborough City Council created the independent panel in December 2021 to judge the council’s work towards meeting its own agreed improvement plan and the recommendations of the independent reports commissioned by the Department of Levelling

Up, Housing and Communities.

The council has insisted that it will implement the recommendations on a number of issues in full. The report can be viewed on Peterborough City Council’s website.