Claim: “The Borough Council has £42 Million in reserves that it could spend instead of making cuts to *****”

This argument is frequently made on social media by a number of people in response to cuts imposed on the Borough Council by the Tory government. The argument is that the Borough Council may have had cuts to its grant of over 40% in the last 8 years, but there is no need for it to make any cuts: it has £42 Million sitting in offshore accounts waiting to be spent. I thought I’d take this opportunity to debunk this myth.

Yes, it is true that the Borough Council has a substantial amount of money in reserve. But it is not true that this money is sitting in a bank account waiting to be spent. 

The total amount in reserves is actually £30.4m, not £42 million. However, the vast majority of these reserves have been earmarked for purposes described below meaning that of this there is currently only £13.5m which is not allocated to a specific project or purpose. (£1.6m in the General Fund & £11.9m in the Housing Revenue Account) The large HRA amount is required to support necessary capital spend in the short to medium term to maintain decent homes requirements.

Of those reserves that are earmarked they are also split into the two sections:

Firstly there is the General Fund (£10.4m), which includes large amounts set aside for insurance, vehicle replacements, IT replacements, maintenance and CCTV replacement and maintenance.

Secondly we have the Housing Revenue Account (£6.5m), which contains large amounts set aside for training and payroll costs, the IT system and New Builds and Acquisitions.

The Borough Council is obligated by the law of the United Kingdom to hold amounts in reserve, in many cases for the purposes outlined above. We cannot simply spend it all to prevent cuts or run a deficit like the government can, we have to meet our obligations.

What could happen if we spend these reserves?

Many of you may have seen in the news recently that Tory run Northamptonshire became effectively bankrupt, becoming the first local authority in more than two decades to issue a section 114 notice (meaning it was unable to meet its financial obligations). This was after the authority spent huge amounts of its reserves leaving it very little to fall back on. Here’s what the Director of Finance for Northamptonshire had to say about the importance of reserves for a local council:

“I think the right figure is about £50m to £100m, maybe even up to £200m, that’s what a county council should have in reserves otherwise it doesn’t have flexibility.

“£12m for a £1bn organisation with services such as adult social care is not enough, nowhere near enough. Nowhere else is anywhere near the position that Northamptonshire is in.”

As we can see above reserves are important for Councils to make sure they can meet their financial obligations. Now the people of Northamptonshire are facing even worse cuts than they were before, with 28 out of its 36 libraries closing and the Council now having to sell its own offices to raise cash.

We in the Nuneaton & Bedworth Labour group are determined to make sure this cannot happen in our Borough. The solution to cuts to spending in our local area is not spending all of the Council’s reserves and risking our future, it’s an end to austerity and the government giving Councils the funding they need to run local services. Instead of unhelpfully suggesting we spend money needed to secure our future, the local Tories should pass this message on to the three Tory MPs in the Borough.