Reserve judgement

18 Jul 08
MIKE THATCHER | It used to be glamorous foreign trips to estates and villas owned by the likes of Cliff Richard, Robin Gibb and Silvio Berlusconi. Now it’s a domestic break sampling the delights of the Suffolk seaside.

It used to be glamorous foreign trips to estates and villas owned by the likes of Cliff Richard, Robin Gibb and Silvio Berlusconi. Now it’s a domestic break sampling the delights of the Suffolk seaside.

Gordon Brown’s choice of holiday destination says a lot about his style as prime minister compared with his predecessor. But it is also symptomatic of the belt-tightening being done by both individuals and government as the country heads inexorably towards recession.

Inflation and unemployment are up. Lorry-driver protests have forced the government to postpone for a second time the planned increase in fuel duty. The Labour Party has even had to cancel its traditional spring conference. And, of course, public sector pay rises have been severely curtailed.

So much so that around half a million local government workers took part in a 48-hour strike this week. Schools were closed and rubbish piled up as teaching assistants, school clerical staff, dinner ladies and binmen all withdrew their labour.

Pay levels are low in local government and a 2.45% increase is, in effect, a cut. Desperate times require desperate measures – hence union leaders’ call for town halls to use their £3bn in unallocated reserves to fund a higher increase.

It’s an understandable request, but not one that should be granted. As CIPFA has pointed out, reserves should be used for one-off contingencies – last year’s floods being the obvious example – and not for ongoing commitments such as pay increases.

To use the reserves in this way would simply be bad financial management and leave authorities in a worse predicament.

If, instead, town halls raid their revenue accounts, this will add further pressure to already over-stretched budgets. It is hard to see an outcome that does not have serious implications for service levels and staffing, or possibly both.

It’s clearly a difficult dilemma. One of many for the prime minister to ponder at his Southwold retreat.

Did you enjoy this article?

AddToAny

Top