Council responds to calls for it to spend reserves and freeze council tax

Following the recent announcement that Bridgend County Borough Council has set its budget for 2021-22, the authority has responded to calls on social media for it to spend its reserves in order to freeze council tax.

Deputy Leader Hywel Williams said: “Calls to spend the reserves are quite commonplace, but they are nearly always made in situations where people make assumptions as to what ‘reserves’ actually means, usually because they are not familiar with how local government finance actually works.

“A council’s reserves should never be thought of as some kind of cash fund that can be dipped into when times are hard. This is far removed from the reality of what constitutes a local authority’s reserves, yet it is also the most common misconception.

“It may sound like it is made up of savings or money that has been put away for a rainy day, but the reality is that the largest part of a council’s reserves consists of funds that have already been marked for specific purposes and projects – for example, meeting the council’s share of the funding required to build new schools under the 21^st Century Schools programme. The money has, quite literally, been reserved for that purpose.

“Only a small portion of a council’s reserves are intended to be used in an emergency, but we are talking about extreme situations where, for example, services are about to collapse because a national banking crisis might mean that the authority cannot afford to pay its suppliers, or an event such as mass flooding might have triggered a wholescale emergency response which requires an urgent influx of cash.

“Our reserves serve an actual purpose, are an important part of our overall budget, and must be maintained at a level which is sufficient to meet a range of legal requirements.

“Local authorities are supported on finance matters by the Chartered Institute of Public Finance and Accounting, and independent external auditors ensure that our reserves are maintained at a level which is both appropriate and fit for purpose. We are also subject to regular reviews which check that they remain reasonable.

“The auditors would be the first to comment if the council was in the practice of holding back money that could otherwise be invested into services, but the truth of the matter is that this is not the case, nor has it ever been.

“As regards the council tax increase of 3.9 per cent, the £3.1m that this will raise will barely dent the £103.5m that we will spend next year on schools alone, nor will it cover the £74m that we will spend on providing vital social services for older and disabled people or children in care.

“We are not the only council to face this predicament. In fact, not a single one of the 22 councils in Wales is able to meet the legal obligation of setting a balanced budget without increasing council tax for 2021-22.

“In the case of Bridgend County Borough Council, Welsh Government funds 71 per cent of our budget, and the remaining 29 per cent is funded via council tax.

“A council tax increase of 3.9 per cent is the only way in which we can deliver a fully-balanced budget. I know that this may seem like a lot, but we will still need to find budget reductions of £1.7m to enable us to meet around £14m of additional budget pressures.

“After the £103.5m on schools and £74m on social services, we will also need to spend £23.6m on services such as family support, home-to-school transport, children with additional needs, £28.1m on community services such as highways, recycling and waste collection, £21.3m on services for the homeless, environmental health, trading standards, and much more besides.

“It may be unpopular and easy to criticise, but council tax remains an essential part of providing the vital services that we all benefit from, and council reserves are most certainly not the cure-all that some would appear to believe them to be.”