Nottingham City Council was £10.9m over budget three months into the financial year – but the leader of the council says the amount is already reducing.
The local authority says the overspend has been largely driven by children in care demands at £5.2m and a reduced income of £3.3m from parking services and the city’s workplace parking levy.
The levy is a form of congestion charge on employers who provide workplace parking. Money from it funds transport projects including trams and buses.
The council says there are signs some employers are reducing their levy licences to take advantage of homeworking on a more permanent basis, which will hit the authority’s income.
Other issues include a £2.4m reduction in company returns, including a loss of income from the council-run Theatre Royal and Concert Hall during the pandemic
From June, there was a £10.9m overspend on the overall budget of £243.7m.
A report prepared for the council’s leader and executive board states: “The council is committed to delivering its services within its approved budget, but it is apparent that this is becoming increasingly challenging given the sustained financial pressures that the council is experiencing.
“Any further use of reserves to meet pressures or unachieved savings is not recommended as the council must demonstrate that it is able to deliver services within existing budgets without reliance on one-off measures.”
The council says work has commenced on the 2022/23 budget, predicated on the assumption of a balanced position for 2021/22.
But if this does not happen then this would result in more budget savings being required for 2022/23 and future years.
It is not yet clear what these would look like, but a better picture will be painted in November when its new budget will be proposed.
The council says its “challenging financial position” is down to funding reductions, an increased demand for services, Covid-19, and the financial impact of being involved in Robin Hood Energy, which went into administration at the start of this year.
There has been annual budget overspends each year from 2016/17 to 2019/20 inclusive, including a net overspend in 2019/20 of £6.8m of which £2.9m was directly attributable to Covid.
A budget gap for 2020/21 of £71.2m, driven by Covid expenditure and pressure from Robin Hood Energy meant the council had to spend £38.7m in reserves and £31.3m of reserves that were to be borrowed and paid back.
The council says it is committed to create a balanced budget but if there is an overspend this year this could result in the local authority making “additional budget savings”.
Things already being done include freezing all staff, agency and interim vacancies but some groups of employees will be excluded.
Any spending that is not essential or which can be postponed will not take place and essential spend will be monitored.
Cllr David Mellen (Lab), leader of Nottingham City Council, said the £10.9m overspend was recorded in June – but this month’s figures show a reduction.
He said: “Like many councils up and down the country, we are facing substantial financial pressures this year because of steeply rising demand for children’s social care services.
“Like others, we have also inevitably seen a reduction in incomes from some of our usual funding streams like car parking and theatre ticket sales during the pandemic, and some of our companies such as the National Ice Centre have been similarly affected.
“While Government has provided some funding to address these sorts of shortfalls, in Nottingham there remains an estimated Covid funding gap of over £19m.
“The financial position remains challenging and, as a result, we have introduced some further financial restrictions, such as a temporary recruitment freeze, to bring our spending in line with what we had budgeted for.
“We remain committed to keeping our spending within our approved budget each year to manage our finances sustainably over the medium to long term, so we can provide value-for-money services that local people need.
“The report looks back at our position at the end of June this year and I’m pleased that action we’ve taken so far is already narrowing the gap.
“Our intention is to reduce that overspend and we have already reduced that to £7m/£8m and we intend to reduce that further.”