The war in Ukraine could yet have an impact on Liverpool Council’s budget.
As conflict intensifies in Eastern Europe, the local authority has warned that the increased inflation risk relating to energy costs in the current financial year could mean it is forced to call on its reserves. According to the council’s cabinet report to be discussed on Friday, there will potentially be a call on its general fund reserve of more than £30m to cover the increasing costs.
The revenue monitoring report said: “The city council set its general fund budget for 2022/23 to 2025/26 on the 2 March 2022. Since the budget was set there has been increased inflation risk around energy price increases exacerbated by the war in the Ukraine.
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“Currently it is difficult to forecast the financial impact on the city council for 2022/23 as spot prices for electricity are very volatile and it is uncertain how long the conflict will last and how energy supplies will be impacted after. The City Council prudently increased its general reserve in 2022/23 to £30.7m and it is anticipated that there will be a call on this general reserve in 2022/23 to fund the increase in energy costs.”
Revenue budget monitors are produced each month of the financial year with a year-end outturn report in June of the following financial year. The reports track progress against the agreed budget decisions, forecasts any anticipated significant variances to the budget, and enables corrective action to be taken.
The monthly reports for 2021/22 include forecasts of the on-going financial impact of Covid-19 on the council. It added that at the end of month 10 - January 2022 - a budget underspend of more than £2m is expected which will be used to support the 2022/23 funds.
However, overspends are predicted in areas such as adult services and health, children and young people, the city solicitor, and regeneration and employment. Corporate management will come almost £27m under budget while almost £7m will be saved through treasury management and capital financing.
General reserves were set at £20m in 2021/22 and the council's decision to increase by £10m during last month's budget meeting was met with criticism and led to the resignation of seven Labour councillors.
