THE city council is again turning to its reserves to plug a £776,000 hole in its budget this year.

Worcester City Council has revealed the gap in its finances and has blamed rising energy and fuel costs as well as unexpected rises in staff wages for the deficit.

The council said it predicts it will be able to balance its budget by the end of the year but that will only be done by taking more money from its reserves.

Financial predictions for the remainder of the year make for equally bleak reading with the risk to some of the council’s finances raised from an already-worrying “significant” to a doom-ridden “highly likely.”

The continuing economic uncertainty means gaps could grow even further and the council admits many of its estimates – both for income and expenditure – could change “considerably” before the end of the year.

A sobering report, which will be discussed by the council’s policy and resources committee at a meeting on November 15, said larger-than-budgeted rises in staff pay – which is currently 7.5 per cent on average or almost £2,000 for every full-time employee compared to the two per cent the council had planned for – and the rocketing cost of gas, electric and diesel is to blame for the budget gap.

The unexpected rise in wages is expected to cost the council around £630,000 extra this year and while the council said it had planned for a 20 per cent increase in gas and electric prices this year – around £330,000 – an extra £128,000 was added to its budget forecast for the first half of the year.

The extra money needed to pay energy bills does not include any promises made to Freedom Leisure, which runs the council’s leisure centres, to help pay its eye-watering gas and electric bills.

Diesel prices have increased by around 30 per cent since the city council’s budget was set in February meaning the £373,000 fuel budget has already rocketed by an extra £100,000.

The ‘City Plan’ fund – which is used to finance short-term projects and the council’s priorities over the next five years – continues to face “significant” risks and the threat to them has been raised by the council to “high likelihood.”

The council maintains it has enough reserves to meet the demands of the current ‘City Plan’ but reserves were cut last year – some close to the bone – to cover other gaps in the council’s budget and reserves.

If, as predicted, further cuts to council funding from central government are made and the council’s own income continues to fall – car parking income, which is one of the council’s biggest earners, is down almost £200,000 and the money the council receives from funerals and burials is facing a £100,000 gap  – then bosses say they might have to move money away from its ‘City Plan’ fund to refill dwindling reserves elsewhere to meet minimum requirements.