Following CIPFA’s resilience index, which found 15% of councils in England at risk of financial instability, the broadcaster analysed government data between 2015 and 2018.
The 152 councils in England held reserves worth a combined £14bn in March 2018 - £500m more than the year before but £400m less than in 2015, the BBC found.
Richard Watts, chair of the Local Government Association’s resources board, said: “Some councils are facing a choice between using reserves to try and plug funding gaps or further cutting back local services in order to balance the books.
“This is unsustainable and does nothing to address the systemic underfunding that they face. Ongoing funding gaps facing local services are simply too big to be plugged by reserves.”
Northamptonshire County Council was top of the ‘at risk’ list with a 91% drop in reserves over the last three years.
The council’s financial difficulties have been well documented after taking the unprecedented step of issuing two separate Section 114 notices in 2018, which prohibits spending on non-statutory services. The council’s finances have since improved leading to calls for its Section 114 noticed to be lifted.
Somerset – another county council – is second on the list, having spent 73% of its reserves over the same period.
The council declared last summer that it was “not in Section 114 territory” despite growing pressure on children’s services. The councils was forced to abandon cost-cutting plans to make staff take two days unpaid leave following union objections.
The remaining councils with drops in reserves between 2015 and 2018 were: Rotherham (-62% of reserves), Thurrock (-58%), Croydon (-55%), Stoke-on-Trent (-55%), Sutton (-46%), Isle of Scilly (-46%), Knowsley (-44%), Greenwich (-44%) and Medway (-44%).
Reasons for these councils dipping into reserves included prepayment of pension costs (Knowsley), paying for regeneration projects (Greenwich) and “unexpected” levels of business rates appeals (Medway).
Jayne Aston, cabinet member for resources at Knowsley Council, told PF: “Whilst we do show a one-off drop in our reserves, I’d like to be clear that we aren’t running out of reserves.
“We have used our reserves [in 2018] on a one-off basis to pay for pension fund contributions in advance, which has saved the council £1.8m so it’s more around effective budget management rather than using reserves to pay for day-to-day services.”
Reserves are contingency money that can also be used for long-term infrastructure projects. The figures were released ahead of a BBC Panorama programme this evening, on the pressures on the social care system.
A spokesperson for the Ministry of Housing, Communities and Local Government said: “We are investing in Britain’s future, and this year’s local government finance settlement includes extra funding for local services.
“Local authorities will have access to £46.4bn this year, a real terms increase that will strengthen services, support local communities and help councils meet the needs of their residents.”
The sector expressed some concern over CIPFA’s proposed financial resilience index, with the Society of Local Authority Chief Executives and Senior Managers (SOLACE) calling for a “more sophisticated approach”.
See the BBC story here - in the section What do the councils say? - for the local authorities’ explanation of why their reserves have dropped.
Analysis released today from the Institute for Fiscal Studies said councils will be forced to cut back on services in the coming years if current funding arrangements continue.
