Councils risk running out of cash reserves

If recent spending trajectories continue, a number of English councils risk running out of cash reserves within four years.

With councils facing ‘systemic underfunding;, new analysis by the BBC has identified 11 authorities the Chartered Institute of Public Finance and Accountancy said would have ‘fully exhausted’ reserves within four years unless they topped them up.

Cash reserves are seen as a measure of financial security. The 152 major councils in England collectively had £14 billion in reserve in March 2018, £500 million more than the year before but £400 million less than in 2015.

Amongst those councils deemed at risk, the data showed Northamptonshire County Council recorded a 91 per cent drop in reserves, having been forced to stop non-essential spending during 2017-18. Elsewhere, Thurrock Council was shown to have spent 58 per cent of its reserves but insisted it was planned and the authority was not running out of money, and Somerset County Council, centre of the upcoming Panorama programme into the issue fo social care funding, said it was putting money back into its reserves after data showed a 73 per cent fall.

Guidance given to councils by CIPFA says: "Balancing the annual budget by drawing on general reserves may be viewed as a legitimate short-term option. However, it is not normally prudent for reserves to be deployed to finance recurrent expenditure."