Thread by @LGAcomms

Councils are often expected to use reserves to plug ongoing budget gaps and #SaveLocalServices.

Using reserves is not the solution to the financial pressures councils are facing. 

A council reserves 🧵👇

Councils hold financial reserves so they can plan for the future & are used in 3 different ways.

Money is used to pay for both planned projects, such as renewing the town centre or harder to predict situations, like a pandemic or responding to emergencies like flooding.

Reserves help councils even out their cash flow. Govt grants often cover spending that happen in more than 1 year – having reserves lets councils use unspent funding for a specific purpose when it’s needed.

Eg money passed on by Govt to make COVID grants to local businesses.

At the start of the year councils held unallocated reserves that would cover an average of 21 days spending (less than 3 weeks) and earmarked reserves equal to 121 days (less than 4 months).

Many councils hold less than this & importantly, reserves can also only be spent once.

The dramatic increase in inflation alongside increases to the National Living Wage and higher energy costs has added at least £2.4bn in extra costs onto the budgets councils set back in March.

Even if reserves are used as a one off, if nothing else changes, #LocalGov will still face a funding gap of £3.4bn in 2023/24 and £4.5bn in 2024/25.

The Govt needs to come up with a long-term plan. Inflation isn't going down overnight and the demand for services keeps going up.

We’re calling on the Government to provide adequate funding for councils and a move away from one-year finance settlements, so councils can continue to keep our communities running.

Join us, and help #SaveLocalServices
local.gov.uk/save-local-ser…