Councils in stand-off with DCLG over reserves
1Communities secretary Greg Clark has renewed the assault on council reserves, claiming they have risen by 170% in real terms over the past 15 years.
In September, Clark hinted that the government could take action to reduce their reserve levels by introducing greater certainty over their future income.
And Clark’s intervention today could signal that chancellor George Osborne is set to announce some form of cap on reserve levels in next week’s spending review.
Clark said: “With local government accounting for a quarter of all public spending, it is right that they are called on to play their part in dealing with the deficit.
“Today’s figures show how they are well placed to do so, with local authorities holding £22.5bn held in non-ringfenced reserves – up 170% in real terms over the last 15 years.
“As we continue to secure our country’s economic future and cut the deficit, now is the time to make efficient use of their assets and resources to provide the services local people want to see.”
Claire Kober, resources portfolio holder at the Local Government Association, said that the figures quoted by Clark were “hugely misleading”.
She said: “Reserves can help councils manage growing financial risks to local services but what’s left after these earmarked reserves would only cover less than a month’s spending at a time when many councils are already struggling to keep services running.
“Ninety-three councils were forced to withdraw money from reserves in 2014/15 and 203 plan to do so in 2015/16, as funding cuts bite.
“However, the size of cuts councils are having to make are simply too big to be plugged by reserves.”
Today’s figures show that over the past year, English councils added £0.9bn to their non-ringfenced reserves, taking the total to £22.5bn.
In 2014-15, 317 local authorities in England increased their overall reserve levels, while 127 decreased them. 316 local authorities increased their non-ringfenced reserve level.
A breakdown by the Office for National Statistics released by the government showed that between 2010-11 to 2014-15, non-ringfenced reserves increased in real terms by 52.8%, while council tax decreased by 14.8%, government grants decreased by 14.3%, and revenue expenditure decreased in by 14.1%.
Any arguments based on this analysis are incomplete without some consideration of unusable reserves – the balances that absorb the differences between the rate at which authorities are consuming resources and the council tax raised each year (Capital Adjustment Account, Pensions Reserve, etc). It is difficult to see how General Fund balances that are less than an overall negative balance on usuable reserves could ever be described as excessive.