Friday, 23 January 2015

Council Budget (4) - Reserves and the 3 card trick

We know from Council Leader Ron Woodley that the economies that Southend Council has to find in the coming year are very much as anticipated. We also know from the pronouncements of both George Osborne and Ed Balls that whatever the outcome of the General Election continuing austerity is inevitable over the next few years.

The current draft budget seeks to close a gap of £12,388M of which £3,090M relates to budget pressures.

I will be looking at some of the specific economies in due course however on the face of it they have balanced the figures but……

Of this gap the sum of £1.888M is being financed from reserves and the report includes this interesting comment:

“Note that the 2015/16 draft revenue budget has been prepared on the basis
of using £1.888m from earmarked reserves to allow for a smoothing of the
budget gap across the next three financial years with a consequent
replenishment of those reserves in 2016/17 and 2017/18”

and in case we missed it the report says at a later paragraph:

"The budget is then balanced by the use of £1.888 million from earmarked reserves to
allow for the smoothing of the budget gap over the next three financial years with
a replenishment to the reserves for this sum over 2016/17 and 2017/18"

And again:

"Members will note that the budget proposals now include the use of some
earmarked reserves to fund the balancing of the 2015/16 budget and items of
one-off project spending. The use of £1.888 million of reserves to allow the
smoothing of the budget gap are to be replenished in 2016/17 and 2017/18"

That’s clear then - except I struggle to see the detail as to how this is to be “smoothed” and what effect this will have on savings targets for the next 2 years.

So when is a saving not a saving? – when you take it out of reserves. I am not quite sure what “smoothing” means in this context but the reality is that they have failed to meet the budget gap (even with an increase in council tax and car parking charges) and are therefore raiding reserves to cover the balance.

Not only is this eroding the level of reserves which should be available for emergencies – which are always possible in areas such as social care – but how are the reserves to be replenished over the next 2 years when further and additional savings will need to be delivered?

This suggests the use of a capital pot to underpin revenue expenditure which is a potential road to disaster.

It seems to be the same old story – the Conservatives create a sound financial base, lose control resulting in Labour and others raiding the piggy bank and leaving a mess that a future Conservative Administration has to sort out. The surprise is that Ron, who has regularly proclaimed himself a Tory at heart, and in previous budget debates has given the impression that on economics he is considerably to my right on budget control, has been willing to p reside over this.

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