County councils dip into reserves to pay for social care, says OBR

27 Nov 17

English upper-tier councils have eaten into their reserves due to social care pressures, according to the Office for Budget Responsibility.

The forecasting organisation noted in its Budget analysis upper tier authorities drew down £1.4bn from their reserves in 2016-17 - much higher than the £200m figure in the previous year.

This formed the bulk of English councils’ use of reserves, which was £1.5bn in total in 2016-17 - up from £400m in all in 2015-16.

Prior to 2015-16, English local authorities last drew down from their reserves in 2009-10 - using £300m in total.

The OBR said: “One striking feature of the net reserves drawdown last year was the difference in behaviour between local authorities with and without social care responsibilities.”

The fiscal watchdog added it had expected the squeeze on local authority finances to prompt reserves draw downs much earlier than has been the case but warned “the corner does not seem to have been turned”.

Analysts at the OBR said this may reflect budget pressures finally reaching the point at which authorities use reserves to maintain current levels of spending, although it is also possible that the reserves had been earmarked for use on specific projects that have now commenced.

Councils have started to use reserves after a trend following the 2008 crisis when they built them up, which saw stockpiles rise by an average of just under £2bn a year between 2010-11 and 2014-15.

But Robert Chote chair of the OBR said that local authorities as a whole are expected to draw down another £1bn this year and £1.7bn in total by 2019-20.

The OBR concluded: “Looking ahead, despite the £2bn of additional funding for social care announced in March, we assume that local authorities’ budgets remain under pressure as the demand for both adult and children’s social care continues to rise.”

It said as councils are under statutory obligations to balance their budgets, it assumes some of these draw downs will eventually taper off to zero, by 2020-21.

The OBR stressed that this forecast is subject to “significant uncertainty” as recent trends have tended to contrast with local authorities’ own budget plans.

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