Call for councils to spend reserves.
Byline: Martin Shipton Chief Reporter email@example.com
PUBLIC Services Minister Leighton Andrews has questioned the high levels of financial reserves held by some councils and suggested they could be used to help mitigate the effect of cuts.
This week Mr Andrews announced cuts totalling PS146m to Wales' 22 local authorities.
But giving evidence to an Assembly committee he pointed out that seven councils had reserves that amounted to over 20% of their turnover, and that total reserves were approaching PS1bn.
He said: "Reserves, it seems to me, are there for a number of reasons.
"Sometimes they are there for prudent forward planning in the sense of budgeting for major capital investments that they develop. "Sometimes they are there against the arrival of a rainy day.
"I think the rainy day has been here now for a year or two, and I think we have to ask very straightforwardly to what extent are those reserves being effectively used and to what extent can we really expect local government to carry reserves such as they are carrying at a time like this."
Shadow Local Government Minister Janet Finch-Saunders said: "Labour has held Welsh council purse strings since 1999. This Minister's concerns may be well placed - but if there is inconsistency, he needs look no further than his colleagues across the Cabinet table. These worries should have been addressed."
Steve Thomas, chief executive of the Welsh Local Government Association, said: "While the headline figures for council reserves may look big, when you look into the matter further the fact is that councils don't have much wriggle-room. The key figure really is the one for general reserves, because earmarked reserves are already effectively committed to be spent. "This year the Auditor General for Wales has warned that 'a few councils are over-relying on general reserves to deal with budget shortfalls rather than seeking more sustainable approaches, which often involve making unpopular decisions'.
"With reserves, you can only spend them once. If they are gone, councils would be exposed to the risk that if some serious unexpected expenditure such as flood repair is necessary, the money just won't be there.
"Over the next three years, councils may be expected to make cuts of up to PS900m.
"The general reserves held by local councils fall far short of this figure and simply do not offer a silver bullet for dealing with the tremendous financial challenges facing councils. Reserves are at best a one-off safeguard which if spent at once by every authority would not meet the scale of a single year's cuts."