LGC’s analysis of councils’ reserves
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Amid the most severe squeeze on public spending since World War Two, it is not hard to see why ministers have alighted on council reserves as an easy target for extra cash.
A little like the mythical £350m a week the Leave campaign promised the UK would gain by leaving the EU, there has been a tendency for ministers to spend this money many times over. But with reserves, as councils repeatedly point out, once they’re gone, they’re gone.
It is particularly galling that ministers have repeatedly criticised councils for stockpiling cash when much of this money is actually being used to negotiate savage cuts and implement far-reaching service change. Meanwhile, as LGC reported this week, NHS bailouts reached almost £2bn last year with the lack of financial headspace acting as a serious impediment to reform.
It is in this context that LGC’s analysis this week looks at what happened to council reserves during 2015-16, the first year to see a drop in local authority reserves since 2008-09. Much of this headline reduction seems to stem from the Greater London Authority while continuing growth in district reserves has helped offset reductions elsewhere. However, underneath this is a picture of some councils that are getting close to the edge.
More than a third of upper tier councils finished the year with less unallocated reserves than they started with and 15% reduced their reserves by more than a fifth. More than a quarter had unallocated reserves of less than 2% of expenditure, or, to put it another way, a little over a week’s worth of expenditure.
LGC’s analysis used recently published Department for Communities & Local Government data on council spending during 2015-16. Like any data set of this scale, it is not perfect but it provides the most comprehensive publicly available picture of council spending and shines a spotlight on the particular challenges councils are facing.
Chief among these was adults’ and children’s social care which between them overspent by nearly £900m last year. Yet in total councils recorded a small underspend of £175m.
Perhaps ministers should take a moment to consider the scale of that turnaround before they start coming after council reserves.