Pickles accused of playing to the gallery in ‘simplistic debate’ over reserves

Section 151 officers have responded angrily to Eric Pickles’ latest criticism over local authority cash reserves.

The Secretary of State for Communities and Local Government made his comments as Office of National Statistics figures showed councils increasing their reserves. According to the ONS, reserves have increased £2.6bn in the last year, or 20% in real terms from 2010 to 2011. “While councils are hoarding billions in their piggy banks some are pleading poverty and raising council tax,” said Pickles.

His take has been condemned as simplistic by finance officers. “Every authority has its own individual reasons why it has taken decisions on reserves,” said Frances Foster, acting executive director for finance and property at Barnsley Metropolitan Borough Council. “They have policies in place that are agreed by cabinet and checked by auditors. Pickles picks out these headlines from figures without understanding what is going on behind them.”

While Pickles takes aim at councils for simply holding onto money, Foster points out that many councils are saving cash for specific purposes. “Much of our reserves are earmarked for things that will boost the local economy,” she said. “We have already determined what they’re going to be spent on, they’re not just sitting there.” Furthermore she points to the uncertain position of local government. “Given the level of cuts we’re facing it is no wonder we’re being prudent,” she said.

Alan Peach is head of finance and property at Arun District Council. “Our general fund balance is around £11.5m,” he explains. “And it is like that because of the huge uncertainty surrounding future funding.” “With things like non-domestic rates and New Homes Bonus no one knows what they are going to get and really this seems like tremendously unfair criticism.”

“It’s Pickles knockabout nonsense again. Sometimes you think he just says things to sound good in the Daily Mail. In terms of what our balances are earmarked for it is hard to say at the moment because we are developing our capital prioritization now. What we have done is increase our minimum from £2m to £4m…but when you just don’t know what is going to happen that seems a sensible thing to do.”

Another source notes the general confusion over “the actual level of cash backed reserves which ‘commentators’ think are free to divert when in fact many are legally ring-fenced and/or earmarked for a known liability or risk.”

The Welsh minister for local government and government business, Lesley Griffiths, recently had a much calmer exchange with councils. After sending out a request for information on Welsh local authority reserves she wrote back to them: “I appreciate the management of reserves is not a straightforward matter and I have no intention of engaging in the simplistic debate which occurs elsewhere.”

Griffiths did, however, point out to Welsh councils her concern over the “considerable variation” between different authorities’ reserves. Remarking that she needed to have a full picture of reserves held and plans for using them she added: “In particular I will need to be reassured authorities are considering how they can use their reserves imaginatively.”