Councils attack Pickles' reserves claims

1 Dec 10
Councils have attacked Local Government Secretary Eric Pickles for suggesting that they could mitigate the effects of the recession by dipping into their reserves
By David Williams

2 December 2010

Councils have attacked Local Government Secretary Eric Pickles for suggesting that they could mitigate the effects of the recession by dipping into their reserves.

Pickles’s comments came as local authorities were preparing  for the toughest local government finance settlement in recent memory following October’s Comprehensive Spending Review. After publishing data comparing councils’ annual spend with the totals they hold, Pickles said English local authorities were sitting on reserves worth £10bn.

Five councils – all second-tier authorities in the Southeast – have more in reserves than they spend in a year. Foremost among them is Crawley Borough Council in West Sussex, which holds £38.1m, more than double its annual revenue spend of £18.8m.

Pickles said: ‘Good financial planning is about putting a little extra away when the sun is shining so you have some cover during the rainy days.

‘Building up reserves isn’t simply about turning town hall vaults into Fort Knox.’

But his comments drew angry responses from councils and local government experts.

Baroness Margaret Eaton, chair of the Local Government Association, pointed out that reserves ‘can only be spent once’ and do not represent a long-term solution to the sector’s financial problems.

LGA vice chair Richard Kemp said Pickles was ‘spraying mud around to hide the fact we’re facing a very difficult spending review’.

The Conservative-run London Borough of Wandsworth, whose reserves are worth 24.7% of its annual spend, said that less than 10% was not earmarked for specific projects.

A spokesman cited a string of Audit Commission reports awarding them the maximum score for financial management and use of resources.

Councillor Bob Lanzer, Leader of Crawley Borough Council, said that ministers' 'high-level view' means they can never fully understand local circumstances, or 'our very good reasons for having those balances'.
He said: 'In this way, statements from central government strengthen the case for localism – decisions being influenced and taken as closely as possible to the people that they impact.'

Alan Napier, Cabinet member for resources at Durham County Council, whose £92.9m in reserves is  the biggest for a unitary authority, said Pickles was being ‘disingenuous’.

‘He used to run Bradford City Council – he knows how this works,’ he said. ‘The PR they’ve spun on this is a load of tosh.’ Napier said his council would be £68m a year worse off by 2014/15, and had no more than £21m in reserves that were not already earmarked for specific projects.

Andy Sawford, director of the Local Government Information Unit, said Pickles had raised a legitimate issue, but his tone was ‘not particularly helpful when councils are trying to engage their publics in complex discussions about the future’.

The row comes amid a dispute between councils and the Department for Communities and Local Government over whether capital reserves can be used to cover redundancy payoffs – a revenue cost.

The CSR has allowed £200m to be used for this purpose in the next financial year, but Public Finance understands that councils are frustrated that the DCLG is not being more flexible, given the extraordinary financial circumstances.

LGA research shows that 45.7% of earmarked council reserves are for capital spending, while only around 3% are ‘unallocated’.

Did you enjoy this article?