Most council cash is earmarked, CIPFA survey finds

1 Jul 15

Almost all of the reserves held by UK councils have been committed to specific investments or to manage future risk, a CIPFA survey has revealed.

The poll asked local authority finance chiefs to identify what financial reserves they held and the extent to which they were earmarked for specific purposes.

It found that, in April 2014, councils held around £19.8bn in reserves, of which £2.3bn had been set aside for schools or public health projects, while a further £13.8bn had been earmarked to meet known or predicted spending requirements.

This left around £3.7bn (16%) held as general reserves in local authority accounts across the UK.

Almost all (94%) of councils said they have plans in place to use the reserves they have built up, with 40% saying they are increasing their reserves because of uncertainty over government policy on areas such as council tax support and localised business rates.

Commenting on the findings, CIPFA chief executive Rob Whiteman said: “The government rightly proclaims the benefits of having a long-term economic plan for its own finances. Local authorities know that using reserves to provide for future services, protect against risks and manage the transformation of services is the right way to manage their finances in the long-term interests of their communities and the country.”

Whiteman added that reserves are a vital part of prudential financial management. “Councils should be congratulated that they have sensibly been building up their reserves to both enable them to safeguard future services for local communities and to protect against both known and unknown risks,” he said.

Local Government minister Marcus Jones said councils are responsible for managing their own budgets.

“It is for individual town halls to decide on the level of their reserves and what they use them for,” Jones said.

“However, we would encourage those which have maintained significant reserves in recent years to use this money to provide and improve the services local people want to see.”

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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