One year into the Spending Review period, the latest figures show that due to good budget management the majority of councils have not yet had to dig deep into their £10 billion reserves.
Overall, English local authorities expect to be holding £10.8 billion in reserves on 31 March 2012. At the same time last year, their forecasts for 31 March 2011 totalled £11 billion.
All councils should keep sufficient sums of money in reserve so that they have a financial cushion to meet sudden unexpected costs.
Local Government Secretary Eric Pickles said:
“All told, councils still have over £10 billion held in reserve to fall back on.
“Most councils have maintained significant reserves, which will give them room to manoeuvre on their finances in future years, and help them to support budgets, and deliver efficient local services.”
Notes to editors
- The reserves figures are from the Revenue Budget (RA) returns for 2010 to 2011 and 2011 to 2012 provided by local authorities to the department. The full list of council reserves is available below:
Determining the level and use of reserves is a matter for individual local authorities, taking into account local challenges and priorities. There is no prescriptive national guidance on the minimum or maximum level of reserves, either as an absolute amount or as a percentage of the budget.
Reserves are either: (a) earmarked, as a result of a policy decision by a local authority to use them for specific purposes (it should be noted that some earmarked reserves have to be set aside for specific purposes under statute); or (b) unallocated, these reserves are part of a local authority’s risk management process, which would be called upon in the event of unexpected costs and emergencies.
A recent report by the Audit Commission found that this year the vast majority of councils have sound financial management and are strongly placed to manage funding reductions. Further, the Audit Commission found that, on average, single tier county councils held unallocated reserves equivalent to two-thirds of their grant reductions. District councils held unallocated reserves of twice the value of their reduction. If earmarked reserves were included, district reserves were 6 times the value of their reduction, and, for county councils, nearly 3 times.
Source data for the councils’ reserves table is from the Revenue Budget (RA) 2010 to 2011 and 2011 to 2012 as sent to DCLG by local authorities.