A councillor has sought assurances that Cheshire East’s £11.5m general reserves would be enough in the event of a crisis because it is lower than most local authorities, writes Belinda Ryan.
The council increased its general reserves from £10m to £11.5m last year – taking it to 3% of the annual revenue budget.
Director of finance Alex Thompson told a finance sub-committee the reserves were adequate as the council managed its budget and didn’t dip into them.
He said: “There’s no demand at the moment to increase those general reserves over the life of the proposed MTFS (medium term financial strategy) that’s out to consultation and it’s deemed that £11.5m is adequate, ensuring that we’ve got appropriate business cases that are properly managed over time.”
Mr Thompson said Cheshire East’s general reserves were low compared to other authorities but added: “There are certain stress tests for local authorities to understand how resilient an organisation would be in terms of their reserves.
“If we had been spending our reserves at an alarming rate, and they were reducing over time, that would be an indication of stress, no matter what the level of reserves were – if they were being spent at an alarming rate that would indicate that you didn’t have financial control year on year.
“We’re not in that position. We’ve held roughly £10m for a number of years, been able to increase it to £11.5m.
“When we were facing significant challenges under Covid-19, when those first calculations were ever done on how much Covid might cost us as an organisation, it was of serious concern that we were not sat on anything like that level of reserves, and some councils were, so it was of concern to us at that point in time.”
But he said it had been managed and, with government grants, the council had retained its reserves.
Knutsford councillor Stewart Gardiner (Con) said: “I accept that, as a council, we are quite reserved in the way we behave… but that doesn’t mean that we are beyond being hit by something that we are not expecting.
“And maybe, yes, in a national pandemic, you’d expect the government to step up to the plate but there might be something a bit more local where there isn’t that national backup support and where we have got to dip into our pockets, so I think we need to be making sure that that is level.”
Mr Thompson said the key thing is being able to make accurate forecasts and allocating more money where it had been shown not enough previously had been given, such as children’s services.
That budget will now be increased by about £4m.
He told the committee the external auditors are satisfied the level of reserves has been suitably assessed and central government also scrutinised councils’ reserves.
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