Latest Public Sector News

02.07.15

Council cash reserves earmarked for future use

Nearly all the cash reserves held by councils have been earmarked for specific investment or to manage future risk, according to a new survey from the Chartered Institute of Public Finance and Accountancy (CIPFA).

A poll of local authority chiefs found that while the headline levels of reserves held by local authorities have increased significantly over the last parliament, almost all of those reserves are already allocated for specific purposes.

Councils held £19.8bn in reserves in April 2014, of which £2.3bn was set aside for schools or public health projects and £13.8bn were earmarked for other areas of future local public spending.

This suggests that there remains £3.7bn of general fund or usable reserves in local authority accounts across the UK.

Nearly all (94%) of local authorities said they have plans in place to use the reserves they have built up, with 40% of councils stating that they are increasing reserves in light of the uncertainty around government policy, such as local council tax support or the localisation of business rates.

Rob Whiteman, CIPFA chief executive, 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 for local authorities to manage their finances in the long-term interests of their communities and the country.

“Reserves are a vital part of prudential financial management and 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.”

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