Comments on Council Reserves

All businesses have to have some financial reserves. However carefully you budget, you can never predict exactly how much will be needed a year ahead. Also, there are always unforeseen events that have to be dealt with. There has to be money available to address these "unbudgeted" costs.
That's where reserves come in.

There are guidelines, recommended by CIPFA (an accounting body that advises councils), for working out how much councils ought to have in reserve. The guideline is that councils should keep between 18% and 30% of its annual revenue budget as reserves. In practice, it isn't as simple as that. I frankly couldn't begin to explain how it really works; even if I could, you wouldn't want to spend time reading about it. It is complicated, and the council's Treasurer advises the council what levels of reserves are appropriate.

Our job is to make judgements about the options that are available to us. The job of working out what those options are is that of the council's treasury team.

The Liberal Democrats' website is delightfully unspecific about detail. It's easy to say "the council salts away money" and it sounds very plausible to say "we would spend it to keep your Council Tax down". All very well, but how much? How much difference would it actually make to Council Tax if we spent all the reserves? Without that detail, the statement doesn't actually mean a lot. It just sounds good.

That's the problem with "sound bite" politics: you have to dig for the detail. When you find it, you also find that there's a downside risk.

The County Council spent its reserves in the early 1990s. You may think that we are paying for that now, with the 18% rise in the County Council's precept this year, compared with West Devon's 2.6%. Think about it: it's your decision on 1st May.


Published as an Internet document by R W Mathew, Willowby, Down Road, Tavistock, Devon