In a bid to avert a looming financial crisis within the UK’s town halls, Simon Hoare, the Minister for Local Government, is encouraging councils to utilise their reserves for day-to-day services.
According to Bloomberg, Hoare emphasised that the reserves, often allocated for emergencies, should be deployed cautiously to benefit communities.
He argued that many councils bolstered their rainy-day funds during the pandemic and that tapping into these reserves is a sensible approach.
However, the call has faced criticism from the Labour opposition, deeming it “ridiculous,” along with scepticism from local authorities.
At the Local Government Association conference on council finances, Minister Simon Hoare defended the idea.
“Reserves are not there to be guarded like they are the sort of flame of the vestal virgins, never to be touched. They are to be used prudently and sensibly for the benefit of communities,” Bloomberg quoted Hoare as saying.
He emphasised that the reserves are up post-Covid and encouraged councils to leverage these funds.
However, Labour’s shadow minister, Jim McMahon, criticised the notion, stating that tapping into one-off reserves to address financial pressures is “ridiculous” and that the higher the risk, the more reserves are needed.
The government’s urging of councils to use reserves for day-to-day spending, such as employing staff and running public services, contradicts the usual advice to maintain reserves for sudden emergencies and to even out cash flow.
The Local Government Association (LGA) has cautioned that one in five councils are on the verge of declaring effective bankruptcy in the coming year or two.
Despite ministerial assurances that the number of councils at risk is lower, the LGA maintains that cuts to central government grants, inflation, and rising service demand have left many councils financially strained.
(With inputs from Bloomberg)
