Analysis shows local authority reserves have grown

CIPFA’s 2022 Financial Resilience Index shows that English local authority reserves have grown to £29 billion, up from £19 billion in 2019/2020.

The index pulls together publicly available data on a range of financial health indicators into a single dashboard. Despite the rise in reserves, the organisations says that the increase in reserves from previous years does not show the full picture. In the 2020/2021 financial year, central government funding payments to councils were made late — leaving insufficient time for local authorities to use the funding before the end of the financial year.

A large part of these increased reserves will have been earmarked for distribution early in the 2021/2022 financial year. In total, £25 billion worth of reserves across English local authorities have already been earmarked, with only £4 billion left unallocated.

Rob Whiteman, CIPFA CEO ,said: "Local authorities are still yet to feel the full impact of Covid-19. The long-term outlook is incredibly uncertain. It's important to understand the financial resilience of our local authorities, especially as expectations are for public service demand to return to pre-pandemic levels this year. Pressures are only going to increase further.

"This transitional year from pandemic to post-pandemic is likely to prove challenging for many local authorities. While the reserves position gives the appearance of health, this masks a much more complicated picture. The short- and medium-term outlook remains unclear, so we need to be cautious. Reserves that have already been allocated are likely to be depleted extremely quickly when demand returns.

"While the financial resilience index can shine a light on areas of possible risk to generate a local discussion, it is essential that a national conversation on funding remains a priority and that local authorities continue to focus on medium and longer-term planning."