Scottish councils cautioned over using reserves for immediate needs

23 Jan 18

Scottish councils have been warned that unplanned depletion of reserves is undermining their capacity for making future efficiency savings.

In its final report on the draft budget, the Scottish Parliament’s local government and communities committee said that, although councils recognised that reserves should be used for longer-term initiatives such as transformation strategies, they were often employed to alleviate short-term pressures, such as the reduced funding settlement from the Scottish Government.

“We are concerned at the increase in unplanned use of general fund reserves by councils and the evidence we received that reserves are being used to address short term funding pressures,” it said.

“Using reserves in this way means those funds cannot then be used to transform services to deliver longer-term sustainable savings alongside better outcomes.”

The committee drew on evidence from the Accounts Commission that 20 councils had drawn on their usable revenue and capital reserves in 2016-17, with the “vast majority” not using their reserves as planned. The commission warned that Clackmannanshire, Moray and North Ayrshire councils would run out of reserves in two to three years if they continued to use them at the level planned for 2017-18.

A spokesman for the Convention of Scottish Local Authorities said it was up councils to decide on the best use of reserves. “The use of reserves, like all other budgetary decisions, is rightly and properly a matter for local discretion based on local need and circumstance,” he said.

The committee also called on the Scottish Government to provide councils with indicative multi-year revenue budgets for the remainder of the parliamentary session to allow effective financial planning.

“The approach councils have to take with annual budgeting is less conducive to good financial planning and may limit service redesign opportunities which may require to be delivered over a number of years,” it warned.

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