Overspend predicted for Exeter City Council's budget

Increased energy costs and staff pay rises are to blame

Exeter City Council’s budget is “precarious” because of increases in pay and energy costs.

The authority is facing an overspend of around £2.1 million this financial year, due to higher-than-expected staff pay rises totalling £1.5 million and a further £600,000 in increased energy costs.

In an update to the council’s ruling executive this week, members were told the black hole is being covered by £100,000 from a general fund reserve and £2 million from a separate ‘earmarked reserve’ set up to protect against “financial volatility.”

A report added: “The impact of the pay offer made to staff is some £1.5 million more than the council budgeted and that, along with significant price increases and energy costs mean that the council’s budget is precarious.

“The work currently underway on One Exeter [a cost-saving programme] is now critical to restoring the financial health of the council. The earmarked reserve can only be spent once and this must now be replaced by reductions to the council’s expenditure.”

Finance chief Dave Hodgson also warned that if the government does not extend a current six-month energy price cap for councils, he expects Exeter’s energy costs will be £2.25 million higher next year.

Councillor Martin Pearce (Labour and Cooperative, Duryard & St James) reacted by saying the potential energy rise next year “sounds like one of those heavyweight blows landing to me.”

“I just can’t believe we’re in a situation where we’re having to respond to this on top of all the savage austerity cuts that we’ve dealt with over the last 12 years as a council.

“Twelve years of misstep has led to this extreme exposure this country’s living through to the market volatility, because the energy market has completely failed them.

“Here we’ve got a really stark example of it, that no matter what we do as a council, we’re going to be faced with potentially having to make further difficult decisions as things go forward because we don’t know what’s going to happen from one day to the next at the moment and it’s really shocking.”

Cllr Pearce thanked Mr Hodgson and his team for the “prudent financial management … that means there is that earmarked reserve for us to dip into in the short-term.”

Cllr Emma Morse (Labour, Mincinglake & Whipton) added: “This is not a way for a country to operate. We’re on the brink of something here that is truly terrifying. We’ll try to find that £2.25 million, but I’m really scared of what our services will look like moving forward and it is at no fault of our own.”