Pay rises cause budget shortfall

Mid Devon workers get £1,925

Mid Devon District Council is forecasting a half-a-million pound overspend on its main budget this year, largely due to higher-than-expected pay rises.

An update at the council’s ruling cabinet on Tuesday [29 November], revealed a recent local government pay rise of £1,925 for all full-time equivalent staff, amounting to an average 6.5 per cent increase, “significantly in excess” of previous predictions.

This has added around £500,000 to staffing costs in the council’s main general fund.

More agency staff than predicted is also adding to the cost pressures, with a report saying the council “continues to struggle with recruitment and retention.”

Local authorities are legally required to balance their books at the end of each financial year, meaning any overspends have to be taken out of reserves to fill the gap. Mid Devon currently has £2.2 million in its general reserves, and had previously agreed this should not drop below £2 million.

However, as this is projected to fall to £1.7 million based on the £500,000 overspend, the report says a “soft freeze” on recruitment and the use of agency staff is now in place.

It explains: “This reviews all vacancies and decides whether the position is business critical, for example a lifeguard or waste-loader and therefore is necessary to fill/cover, or whether the service will have to manage without for a period of time by cutting its cloth accordingly.

“Similarly, all expenditure will be reviewed to ensure it is essential.”

However, deputy chief executive Andrew Jarrett is “hopeful” the overspend will reduce by around £150,000 once the council is reimbursed by the government for a number of projects it has carried out this year, including the energy rebate scheme.

The report added: “Considering the additional cost of the pay award, agency staff and probable pressures on income during the second half of the year, the forecast overspend of £504k shows that good budget management continues within services in order to mitigate this funding pressure.”

The update comes as the council prepares its budget for the next financial year, with a shortfall of almost £1 million currently forecast.