WLGA letter: Councils' reserves- the facts
28 October 2008
The recent article on council reserves was both misleading and surprising at the same time. If the figure of £531m allegedly "blew the socks off" the AM for Mid and West Wales then he really needs to worry. How does he think schools, leisure centres, city centre regeneration, industrial units, transport, roads and other capital projects are paid for? Cardiff has a huge capital programme which involves millions of pounds of council investment for projects like waste management infrastructure and school reorganisation, together with the facilitation of major regeneration schemes such as the International Sports Village, these schemes having largely never been supported by money from the Assembly Government.
The same is true of other authorities who are tasked to provide the infrastructure of Wales and not just build offices for civil servants, or in the case of north Wales not quite build offices for civil servants. The use of earmarked monies in councils is well understood by the Assembly and Ministers. To feign some sort of shock at them is absurd.
In terms of unallocated reserves can I question whether critical AMs want us to ignore the Wales Audit Office guidelines and not keep a 5% reserve? It this is the case, I am sure that the Auditor General for Wales would act swiftly to warn about dangerously low levels of reserves.
The idea implied in all these arguments is that there is a collective sum of £144m at the disposal of Welsh local government which is nonsense. It's like adding up the reserves of WAG, the Scottish Executive and the Northern Ireland Assembly and creating a figure for something called devolved government. There are 22 individual sovereign authorities in Wales some with reserves as low as £2m. Reserves are constantly used to support service provision, often in the form of compensating for service overspends in volatile areas like education and social services or lowering the council tax.
There are reserves for insurance purposes and they are used as the first point of financial call in emergencies. As the dreadful floods last year in Hull and Sheffield proved, if there is an emergency such as flooding it is not civil servants out there with the sand bags, providing immediate aid, emergency accommodation or social care, it's local authority workers and their reserves that pay for this, particularly in the first instance . The Assembly Government has been urging authorities to settle equal pay claims and job evaluation for over 4 years and many authorities have had to build up significant funds to pay for this. Again, do they want us to renege on our obligations in this respect?
Finally, since all local authority reserves of whatever nature, including school balances which councils have no access to, are being grouped together can I ask the Assembly Government to quote what their total levels of all reserves will be for both this financial year and next financial year? As the main providers of direct front line service delivery it is vital that councils keep a prudent sum of money. Reserves are however a one off and once spent this money is gone. The Assembly Government has to spend millions in writing off huge deficits in the NHS. It was in this respect that I was somewhat surprised at the recent newspaper coverage since I had taken the Finance Minister's comments to be warm congratulations to the 22 councils for their sound financial management, despite the fact that the Assembly consistently under funds them in comparison to the health service.
Yours sincerely
Cllr Rodney Berman
WLGA Finance Spokesperson /Llefarwr WLGA dros Arian ac Adnoddau