Council reserves go up as spending goes down

“English councils have amassed huge cash reserves while blaming budget cuts for reduced spending on services, official figures suggest.

Local authorities, excluding police or fire and rescue authorities, were sitting on £21.8 billion of non-ringfenced reserves last year, £5 billion more than they had in 2017 and £11 billion more than they had at the start of the decade.

Spending on local services, including libraries, parks, bus services and bin collections, has fallen by about 21 per cent since 2010, when the government began slashing the central grant it gives to local authorities. Many councils have also been raising council tax bills.

The Taxpayers’ Alliance, which campaigns for lower tax, said that some authorities were making questionable decisions with their budgets that meant residents “paying more for less”.

Some local authorities, particularly county councils with social care responsibilities, have struggled with chronic shortages and have been dipping into their reserves but others have fared better. District councils, which benefit from business rates and provide less resource-intensive services such as leisure centres or bin collections that can be scaled back or made chargeable, have found their reserves swelling as a proportion of spending.

Since 2010 district councils have grown their non-ringfenced reserves from 50 per cent of service expenditure to 130 per cent. By comparison the savings ratio for county councils has risen from 20 per cent to 30 per cent. This does not include spending on education and public health, which have ringfenced corresponding reserves.

Last year Coventry city council said it could no longer afford to provide free school buses for disabled children, yet it is holding £97.6 million in usable reserves, up 76 per cent on 2017. It is planning another £11 million of cuts.

In its annual accounts the council accepted that it was difficult to explain the need for such high levels of reserves but said that the financial challenges it faced and projects it had established provided a “strong justification”.

David Phillips, of the Institute for Fiscal Studies, said that councils could be taking precautionary measures because they expected more acute funding shortages in future and business rate receipts were volatile. Richard Watts, of the Local Government Association, said: “Reserves are vital to help councils manage growing financial risks to local services . . . They are also used to make long-term investments.”

Source: Times (pay wall)