Lancashire CC finances at ‘tipping point’ as auditors predict national drop in cash reserves

Reserves at Lancashire County Council (LCC) are forecast to drop amid ongoing and widespread financial challenges, with almost 200 local authorities in England predicting a net decrease in reserves in the coming year.

Lancashire is in the top 20 of councils forecasting the most significant decreases, alongside major councils including East Sussex, Northamptonshire—whose reserves were nearly emptied earlier this year in order to plug a growing deficit— and major metropolitan councils including Birmingham and Liverpool.

Over half— 199 out of 353 authorities— have forecast a plunge in reserve cash pots, as mounting financial pressures on councils could lead to many issuing a bare-bones ‘Core Offer’ of services to their local area.

Lancashire County Council’s annual financial review, conducted by audit company Grant Thornton UK and discussed at the authority’s audit, risk, and governance committee last week, forecast much of the same— with the review claiming the authority’s finances are at “tipping point” and expecting even greater challenges in the future.

“The council’s financial position is at a tipping point and continuing reliance on reserves is seen as unsustainable,” the report said. “The need for a more transformational and rigorous savings programme needs to be delivered during 2018-19 and beyond.”

Grant Thornton noted that “some difficult decisions” will be made in 2018-19 to ensure LCC balances the books.

The approval of Lancashire CC’s accounts remain held up over the controversial £50m ‘LOBO’ loan revealed by PSE last week. In its official audit document, Grant Thornton noted that LOBO loans have been subject “to significant public scrutiny” in recent years and, during this year’s financial audit, increased scrutiny has been placed on such financial instruments in terms of legality, value for money, and accounting treatment.

At the committee meeting, director at Grant Thornton Mike Thomas said the council has some “significant challenges, as other authorities do, going forward.”

He added: “There is a new operational plan and new savings programme in place – and it will be a crucial year for the council to make sure it delivers against those plans.”

A spokesman for the council said: “The authority has presented a presented a balanced budget for 2018-19 and has already reduced the £200m deficit in the medium-term budget by more than 25%.

“The council is looking to identify more savings and reduce its planned use of reserves in 2019-20 and beyond so it is no longer reliant on reserve funding.”

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