A projected overspend of more than £6 million in the first part this financial year has been confirmed by Newcastle City Council.
The authority has blamed its financial issues on a "better-than-expected" pay award for council staff as well as the higher level of inflation on "third party spend".
Documents presented to the city council's finance and budget monitoring scrutiny committee on Tuesday said the council had a projected overspend of £6.2 million for the first quarter of 2022/23, against the agreed budget of £24.17 million.
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This includes the use of reserves estimated to total £8.3 million to off-set the " Covid scarring" of specific services. The report presented to councillors said Covid lockdowns continued to impact on the authority's budget, with income shortfalls and "disruption to the achievement of planned budget savings" still causing issues.
The report continues to state that the issue has been worsened by the recent surge in inflation, leading to higher costs across many services.
The report continued to state that managers and management teams would need to continue to manage their budgets, and that they would "seek to address overspends as far as possible."
Any overspend at the end of the financial year would be funded from the financial risk and resilience reserve. Future pressure on the council's finances would need to be reflected in the medium term financial plan, and be funded from savings across the council.
Speaking at Tuesday's meeting, Coun Colin Ferguson warned that there could be more pressure on the council's finances, with government cuts to local government looking increasingly likely.
Coun Ferguson said: "We need to wait and see what the Government will decide and where the axe will fall."
The council's chief finance officer, Mark Nicholson, called on the Government to push through a planned reset in business rates.
He explained: "What we need to see is happen is a reset of business rates. That is definitely something that would benefit the city.
"Many local authorities, particularly district councils, have a level of funding from business rates that is higher than the Government expected. We are about where the Government expects.
"That benefit to those councils will be redistributed. A business rates reset is something I would like to see happen more quickly."
A revaluation of business rates was due to take place in 2021 - however, this was postponed to help reduce uncertainty for firms affected by coronavirus.
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