Councillors ask why not use reserves?

Why are Powys residents expected to stump up an extra 7.5 per cent in Council Tax from April 1, when the council has around £50 million squirrelled away in reserve accounts?

The question was brought up at a meeting of Powys County Council’s Finance Panel on Wednesday, January 31- where members when through the nitty gritty of the 2024/2025 budget.

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Last month the Liberal Democrat/Labour Cabinet agreed the draft budget and that no money from the reserves will be used.

Next year’s council budget is set to go up to £340.7 million.

Budget documents explain that there is expected to be an £18.458 million budget gap that needs to be plugged.

Of this £10.652 million of this will be addressed by the council in a mixture of cuts, savings, and income generation.

However, the remaining £7.805 million is set to be covered by residents in Council Tax.

The increase will add an extra £114.33 a year on the bills of Band D homes.
Town and Community Council as well as Dyfed Powys Police will then be added to the total making the overall bill one of the highest in Wales.

Amongst the budget documents are details of various council reserve pots of money.

On April 1, 2023, the total usable reserves that Powys had was £57.7 million – which went up to £67.968 million when ring fenced reserves for schools, and the Housing Revenue Account (HRA) are included.

By March 31, the council is predicting that it’s usable reserves will shrink to £49.795 million which comes to a total of £53.54 million when the ring fences schools and the HRA reserves are included in the total.

The council also has a “risk reserve” built into the main budget of £3 million earmarked for use to manage problems as they emerge during the year.

Plaid Cymru group leader, Cllr Elwyn Vaughan said: “There’s a pot of money there and when people are facing tough times, they are asking why some of that can’t be used.

“I think it’s a fair question or are we like squirrels hiding the nuts away.”

Newly promoted director of corporate services and s151 officer, Jane Thomas explained that as a budgeting principle the council holds a general reserve of least four per cent of the net revenue expenditure expected over a five year period.

Ms Thomas added that he council also has: “a number of specific reserves.”

Ms Thomas said: “We are drawing around £7 million from reserves this year (2023/2024)  for specific purposes.

“You have grants in there that have to be drawn down over specific period of time and we have a capital reserve that we are using to keep our borrowing down.”

She also pointed out that the £6.6 million reserve held by schools had been all but exhausted this year as it was used to covered costs due to inflation and high utility bills.

At the end of the financial year Ms Thomas explained that the council is “very careful” about what is set aside and what is used.

Cabinet member for finance, Labour’s Cllr David Thomas said: “The general reserve is all we have really to protect us over and above the risk reserve.”

Cllr Thomas believed that the Powys Council Tax rise is just below the average for Wales of 7.6 per cent.

Cllr Thomas said: “Some of those councils that have been using reserves in the past are setting high levels of Council Tax.

“It’s foolhardy really as you’d have to pay it back, either as higher Council Tax in the future or further service cuts – that’s why we’re not recommending use of reserves.”

Comments from the Finance Panel will go to Cabinet at a meeting later this month – while the budget will be voted on at a council meeting on February 22.

On March 31, the council reserves are predicted to be:

General Fund – £10.268 million.
Budget management reserve – £3.584 million.
Specific reserves – £27.526 million.
Transport and Equipment funding reserve – £8.417 million.

Total usable reserves – £49.795 million

Schools delegated reserve – £146,000.
school loans and other items – minus £364,000.
Housing Revenue Account – £3.967 million.

Total reserves – £53.544 million.