National & International

Council cuts threaten local services

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Some councils in England have been warned they risk running out of cash reserves if recent spending continues.

Analysis by the BBC has identified 11 authorities the Chartered Institute of Public Finance and Accountancy (Cipfa) said would have “fully exhausted” reserves within four years unless they topped them up.

The Local Government Association said councils faced “systemic underfunding”.

The government said councils were responsible for managing their funds.

In guidance to councils Cipfa said: “Balancing the annual budget by drawing on general reserves may be viewed as a legitimate short-term option. However, it is not normally prudent for reserves to be deployed to finance recurrent expenditure.”

Economist Neil Amin Smith said: “Either councils will have to stop providing some of the services that they currently provide, central government grant funding will have to be re-introduced, or councils will have to be given access to additional sources of revenue.”

Councils have faced cuts to their government funding and rising demand for services such as social care, while MPs have warned children’s services are at “breaking point”.

Cash reserves – money held back for specific projects or emergencies, such as flooding – are seen as a measure of financial security.

The warning was based on the latest data available, comparing reserves as of March 2018 with March 2015.

Councillor Richard Watts from the Local Government Association said: “Some councils are facing a choice between using reserves to try and plug funding gaps or further cutting back local services in order to balance the books.

“This is unsustainable and does nothing to address the systemic underfunding that they face. Ongoing funding gaps are simply too big to be plugged by reserves.”

A government spokesman said this year’s local government finance settlement included extra funding for local services.

He said: “Councils are democratically elected bodies responsible for making their own financial decisions and managing their resources.

“All local authorities are required to hold sufficient unallocated reserves to meet unexpected financial risks.”

He said local government had access to £46.4bn in 2019-20.



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