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Pickles slams councils for ‘stockpiling’ cash

By Vivienne Russell | 29 November 2013

Local Government Secretary Eric Pickles has accused councils of misleading the public by claiming they have no money left, but continuing to add to their reserves.

According to provisional local authority revenue outturns for 2012/13, published yesterday, councils’ cash reserves increased by over 20% in real terms since 2010. Reserves are now worth over £19bn, the Department for Communities and Local Government said, an increase of £2.6bn in the last year alone.

Pickles said: ‘There are no rules on what councils should hold in reserves and taxpayers will be amazed that while councils are amassing billions in secret stockpiles some are pleading poverty and raising council tax bills for hard-working families.’

He urged councils to tap into their reserves to fun frontline services or pay for the short-term costs of restructuring management.

But CIPFA said building up reserves at a time of uncertainty was a sign of good financial management.

Chief executive Rob Whiteman said: ‘If local councils are trying to manage their reserves to protect the public from future financial problems this is good financial management and should be applauded. 

‘In fact, it is encouraging that the majority of councils are exercising prudence in their reserves management, providing crucial capacity to invest in service transformation and protect against future unexpected shortfalls.’

He added that using reserves to fill one-off funding shortfalls was likely to lead to significant financial problems in the future.

‘It makes a good headline to claim reserves are a problem, but it should not mask the fact that councils are managing the most significant cuts faced by any public service,’ Whiteman said. 

‘It is a shame that they are being impugned when the evidence simply doesn’t stack up to justify this.’

Yesterday, the Audit Commission said that, while the majority of councils were demonstrating considerable financial resilience, one in ten had struggled to deliver their planned budgets.

Its Tough times report noted that, while the level of a council’s financial reserves was rarely mentioned by auditors as a factor giving cause for concern, the commission’s own analysis shows that single and upper-tier authorities with a below-average level of reserves relative to spending were three times as likely to feature in the group of councils where auditors had concerns.

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