Council reserves rise to record levels
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Non-ringfenced revenue reserves held by councils rose by 8.7% to reach a total of £23.7bn during 2018/19 last year, according to official figures.
The Ministry of Housing, Communities and Local Government this week published provisional outturn figures showing the figure at its highest level since the beginning of austerity in 2010.
But there is disagreement in the sector as to whether the rise demonstrates that councils are in a healthier financial state than they are pleading.
Commenting on the figures, former Boston Borough Council chief executive Richard Harbord said: “We have to be cautious about these figures. As local authorities get more desperate, they are making provisions for costs they know are looming.
“I don’t believe local authorities have money sloshing around – they must be doing it to guard against future losses or adverse business rate appeals.”
Interim finance director Stephen Fitzgerald: “The reality is local authorities have become quite good at making savings in response to austerity.
“I think this is a problem for local government – the repeated mantra that we are running out of money and Armageddon is nigh doesn’t cut very well with government when it sees reserves going up.”
But Jennifer Glover, local government finance lead at the Local Government Information Unit said that many councils are topping up their reserves to weather the uncertainty caused by the government’s lack of clarity over local government funding in 2020-21.
She said: “Councils are legally required to balance their budgets but currently have no idea how much money they will have next year – many will be putting aside cash to keep things running.”
The government said that the £1.9bn aggregate rise within non-ringfenced reserves was partly driven by an increase of £776m in the Greater London Authority’s (GLA’s) revenue reserves, largely due to Transport for London’s refinancing of rolling stock for the Elizabeth Line.
It said that, when excluding the GLA, total net additions to non-ringfenced reserves was £1.1bn in 2018/19.
And the provisional outturn figures showed that, despite the rise, there were substantial variations among local authorities with 164 (37%) making a net use of reserves during the year.
The increase was sharpest among shire county councils, where 48% dipped into reserves, compared to 44% the previous year.
The figures for metropolitan districts remained level at 44% while the proportion dropped in unitary authorities (43% to 38%) and London boroughs (45% to 42%).
Fitzgerald said that this could show that unitaries are better equipped to cope with pressures on social service budgets than county councils.
He said: “These services make up a bigger proportion of spending in a shire county. In a unitary authority you have more scope to spread the burden.”
The provisional outturn figures showed total local authority service expenditure excluding education services was £59.2bn in 2018/19, 1% higher than in 2017/18 when adjusted for inflation.
The category of service with the largest increases (not adjusted for inflation) in expenditure was adult social care, up by £783m (+5.1%) from 2017-18 to reach £16.1bn in 2018/19.
The second highest rise was in children’s social care, up by £514m (+5.8%) from 2017/18 to hit £9.4bn in 2018/19.
