Dear Editor,
Okay, council finances are dry reading but CIPFA (Chartered Institute of Public Finance & Accountancy) offers a useful explanation of Council Reserves because reserves are important.
They 1) cushion the impacts of uneven cash flows and avoid temporary borrowing. 2) provide a contingency for unexpected emergencies and 3) can be ‘earmarked’ to meet anticipated requirements.
Of course calculating what general reserves are needed, is a complicated balance of strategic, operational and financial Risk! (CIPFA 03.2023)
For example; the Conservative administration (in 2017-19) used reserves to finance planned projects across the borough, reducing general reserves to £10.3m (3.9% of the Revenue budget), but in February 2019/20 MTFS, prudently allocated £1.7m to replenish General Reserves to £12m (4.5% of the Revenue Budget and close to the 5% widely considered ‘good practice’).
It’s therefore a bit rich when the Labour/Independent administration regularly cite “inherited” low levels of reserves, as causing current budget problems.
When they took office in May 2019, they ignored the February 2019/20 MTFS decision and chose not to transfer the £1.7m to General Reserves.
They didn’t add to reserves in the following 2020/21 MTFS either – despite rising annual revenue budgets.
In short, under this Labour-led administration, General reserves fell in percentage terms before the emergence of Covid, (and not surprisingly, flat-lined in response to post-Covid pressures, – See graph below).
Of course, Covid, International affairs and the resulting cost of living crisis was a ‘perfect storm’ that no one predicted, and has created financial pressures for councils across the country.
The Conservative Group continues to submit budget proposals for consideration by the CEC coalition, because no councillor wants to inflict an S114 scenario on residents or staff.
But let’s be clear, reserves under the Conservatives were well managed, in line with 2019 revenue income with a prudent, £1.7m general reserves replenishment decision, approved at the February 2019 MTFS Council.
Choosing not to replenish general reserves as revenues rise, is notoriously problematic and therein lies the real risk – we didn’t need a pandemic to teach us that.
Yours,
Cllr Janet Clowes (Wybunbury)
CEC Conservative Group Leader (Opposition)
References:
CEC MTFS Reports 2018/19, 2019/20, 2020/21, 2021/22, 2022/23, 2023/24 (Appendices ‘C’: Reserves Strategy Sections)
https://moderngov.cheshireeast.gov.uk/ecminutes/ieListMeetings.aspx?CId=239&Year=0
CIPFA Bulletin 13: Local Authorities Reserves and Balances (Up-dated) March 2023
https://www.cipfa.org/-/media/files/policy-and-guidance/cipfa-bulletins/cipfa-bulletin-13-local-authority-reserves-and-balances.pdf
I am of no political persuasion, I will vote for who I believe give me the best standard of life at an affordable cost.
It’s hard to compare local government against national government, all party’s have made mistakes over the last few years,but blaming one another is the major reason we never learn from both mistakes and success over the years.
To be elected party’s have to stand out,often just changing things because the last people in power did things a certain way.
We need to continue with the best practice, change the ones that aren’t working and move forward in an affordable way,too much money is wasted on silly schemes, Multi storey carpark in Crewe is one shining example, not needed, the one place in Crewe that desperately needs parking is Leighton Hospital, and it would always be full and generate income for the council.
It’s easy to be critical but are local council make it very easy to do so.
So for me the time has come for people to stand up and be held accountable for there poor decisions that have left not just the council but the local area in a far worse state than in which they found it
So no scandals under the conservative council involving planning and budgets and wasting money because of it… Half truth is wonderful
Very helpful letter Cllr Clowes. Thank you for it and the web references.
Perhaps adding the impact of inflation in relation to the revenue budget year on year increase may add more perspective? Could real terms cuts in the revenue budget lead to a need to utilise reserves to make up the shortfall?