Portsmouth City Council budget overspend at £6.8m

Portsmouth City Council blamed and a higher-than-expected pay rise for employees for its overspend

Inflation and rising interest rates have left Portsmouth City Council with a multi-million pound financial black hole this year.

The latest forecast shows the council is overspending the budget it set at the start of the year by £6.8m.

A budget monitoring report showed higher-than-expected pay rises for employees and increasing energy costs as being the largest contributors.

Leader Gerald Vernon-Jackson said it faced "significant financial pressure".

"We expected a level of increase but not to the extent we've seen and the recent economic problems have made that even more difficult," he added.

"We will work to make sure we can deliver a balanced budget over the coming months but I don't see any government support coming our way."

The report showed the council's overspend would be even higher had it not had almost £5m in contingency funds to draw down from this year, according to the Local Democracy Reporting Service.

'Big worry'

The council's pay award this year - a flat £1,925 increase - is expected to work out at an average pay rise of just over 6% per employee and amounts to £3.8m more than the 2.5% it budgeted this year.

Rising energy prices have added a further £1.8m.

The council's director of finance, Chris Ward, said the current economic issues facing the country were likely to hamper long-term cost-cutting measures.

"Inflation is the big worry," he said.

"If the response is to raise interest rates then the opportunities for any invest-to-save schemes are more difficult because the cost of borrowing is rising."

He said the authority had "sufficient financial resilience" to accommodate the overspend, but at least £4.5m of that would continue into future years.