Exclusive: Squeezed councils sitting on reserves of £1bn

COUNCILS across Yorkshire are still sitting on cash reserves of almost £1bn after several years of the harshest public spending squeeze in living memory.
Council reserves across Yorkshire. Below: Communities Secretary Eric Pickles. Graphic by Graeme BandeiraCouncil reserves across Yorkshire. Below: Communities Secretary Eric Pickles. Graphic by Graeme Bandeira
Council reserves across Yorkshire. Below: Communities Secretary Eric Pickles. Graphic by Graeme Bandeira

Figures released by the Department for Communities and Local Government (DCLG) show that Yorkshire’s 22 councils had a total of £989m in their reserves at the end of the 2011/12 financial year – down from around £1.2bn in 2009/10.

Communities Secretary Eric Pickles has repeatedly attacked councils for stockpiling large amounts of money for the preverbal ‘rainy day’, warning in a recent DCLG document that he suspects even so-called allocated reserves “do no actually have a proper purpose”.

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He has ordered authorities to invest the money “creatively” to boost growth in the local area and help cope with the ongoing cuts in their annual budgets.

Communities Secretary Eric PicklesCommunities Secretary Eric Pickles
Communities Secretary Eric Pickles

But in Yorkshire, an analysis of the amount each council is holding in its reserves, in proportion to the size of its annual budget, shows there are still huge disparities around the region.

Hambleton District Council, one of the smallest local authorities in Yorkshire, is sitting on a cash pile of almost £18m – nearly half its annual turnover.

By contrast, the far larger City of York Council is sitting on £13.9 million – just 2.4 per cent of its annual budget.

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Hambleton secured its huge cash reserves by selling off its council houses several years ago, and says it is now using the money to hold down council tax levels each year and avoid cutting back services.

Justin Ives, Hambleton’s director of resources, said: “The council’s reserve levels emanate largely from the sale of its housing stock a number of years ago.

“Since this time the reserves have been effectively managed and used to invest in community priorities.

“In recent years, during a time when the council has suffered a 29 per cent reduction in its annual grant funding, they have been used to protect front-line services for the communities of Hambleton.”

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Scarborough Borough Council was another authority with massive cash reserves, worth more than 20 per cent of its annual turnover.

It said DCLG’s figures were correct as of last summer, but claimed much of the money has since been spent – meaning its actual reserves are now at a “basic level”.

Nick Edwards, the council’s director of business support, said: “While the figure as of summer last year shows a total reserve figure of £20m, much of that was already committed for expenditure, which has now taken place.

“We have comprehensively reviewed our financial strategy for this current year, and we have been able to reduce our reserves to a basic level.”

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Harrogate Borough Council, another smaller council with more than £20m in its reserves, insisted the money it has set aside was “proportionate and appropriate in relation to the council’s activities”.

However, the figure represented more than 11 per cent of its budget – nearly double the Yorkshire average.

The council with the largest overall reserve in Yorkshire was Bradford, which had more than £105m in the bank as of last summer.

However, this represented only seven per cent of its annual budget.

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“Comparing total reserves is misleading and simplistic because it ignores the council’s size,” said Bradford’s deputy leader, Coun Imran Hussain. “Bradford has bigger reserves than smaller councils, but they represent a relatively small proportion of our total budget.”

Coun Hussain said some of Bradford’s savings have since been committed to one-off projects, but cautioned against authorities systematically using stock-piled money to prop up their annual budgets as Government grants are cut back.

“Reserves can only be spent once,” he said. “Our policy is to use them only to fund time-limited activities and investment, or to support transitional arrangements.

“Using reserves to fund recurrent expenditure leads to big gaps in funding when they run out.

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“We are open and transparent about our reserves and keep their deployment under regular review.”

Leeds City Council, the region’s largest authority, has proportionately one of the smallest reserves in the whole region, worth around three per cent of its annual turnover.

A spokeswoman for Leeds said this was a conscious decision taken by the authority given the current constraints on public spending.

“We don’t believe it’s appropriate to keep large amounts of public money that could be better spent on delivering services,” she said. “Our reserves are very modest.

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“Given the current difficult financial situation facing councils, we believe our approach is prudent and financially responsible in providing a buffer to deal with unforeseen circumstances or emergencies.”

The DCLG figures highlight that within the £989 million Yorkshire’s councils held in their reserves, around £222 million has not been set aside for specific projects.

These unused, or unallocated, reserves also vary enormously in their size.

Last year East Riding council had proportionately the largest unallocated reserve, but told the Yorkshire Post that this money was being saved up specifically to invest in a major road maintenance programme and to soften the blow of the latest round of cuts.

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A spokesman for East Riding said: “The council currently has £6.5m unallocated reserves for unforeseen events.”

“The reserve as at the end of the 2011/12 financial year could only be used once, and was fully committed to one-off schemes.”