Cornwall Council, its reserves and why it needs them

When it comes to setting a budget the issue of reserves comes up. It is used as a political football between the political groups at Cornwall Council and even the PM entered the foray by saying Cornwall Council is sitting on £200m worth of reserves, yet is cutting services.

A face value, it does seem an awful lot of money sitting in the bank. However, face value is not the full story as I will explain.

Cornwall Council currently spend over £1bn each year delivering services for people in Cornwall.  The range of services provided by the Council is staggering and includes: caring for vulnerable adults and children, maintaining Cornwall’s schools, repairing our roads, providing fire and rescue services and supporting the local economy to create jobs.

The Council receives funding for these activities through a mixture of government grants, business rates, council tax and, where appropriate, from fees and charges.

It is no secret that Cornwall Council has since 2010 faced considerable financial challenges as a result of Government’s programme of austerity. From to 2010 to 2013 the Council has to save a staggering £170m. This was painful, but then the Government hit the Council (and other LA’s throughout the land) a further £196m worth of cuts. This is on top of increased demand.

The Council has, and rightly so set aside money in reserves.  Reserves are an essential part of good financial management, enabling the Council to cope with unforeseen circumstances and spread the cost of paying our bills.

Around £40m of our reserves are actually held on behalf of partners and schools, which means the Council is not allowed to use them.  Others are “earmarked” for specific purposes.  These include paying for future building projects, such as new schools or roads, settling outstanding insurance claims or meeting redundancy costs for any further restructuring of the authority.

These are all costs the Council knows we will need to meet in the future and setting money aside now means we will not need to find it all at once when we need to pay it.  This is particularly the case with our Private Finance Initiatives (PFI), where the Council puts money away to fund the long-term costs of maintaining and refurbishing our PFI schools and fire stations. We currently hold £118m in earmarked reserves, £74m of which is for PFI.

This means we hold just £41m of un-allocated money within our General Fund reserve – less than 5% of our annual spend.  These are the only usable reserves which the Council can call on in a sudden and unforeseen emergency such as flooding. Of course, all the money we hold in reserves originally came from you, the taxpayer and it is important that we maintain the right level of reserves: too little and we will not be able to manage financial shocks and sustained financial challenges; too much and we will fail to make best use of our resources in the delivery of key services.

How much a Council should hold in reserves, there is no set formula for deciding what level of reserves is appropriate. Councillors are responsible for ensuring we have a sensible level of reserves.  It is clear that there are still some tough times ahead, but because of the money we have set aside in reserves, the Council is well positioned to face the financial challenges.

I hope this makes sense?

16 comments

  • Stuart Roden

    Hi Andrew. I think this is really helpful. The media and many members of the public always blame Cornwall council for closures or increases in costs,yet there is never any real understanding about how council finances work and the real impact of government funding cuts on the council.

    I think the council should be putting out briefings on the impact of central government cuts.

    The LGA issued a letter in the Sunday papers seeking an end to cuts to Local authorities and I think it is time that the sector starts to fight back or at least expose the truth.

    The council gets all the blame for matters wholly outside their control and become the whipping boys for central government cuts,whilst they seem to get away with it “scot free”.

    Stuart

  • Andrew Wallis

    I will take this forward, Stuart

  • Fred

    But don’t forget to mention the constant increase in Cornwall Council tax to cover Cllrs meal allowances and bottled water at County Hall and the money wasted on consultants and agency staff. You only seem to favour the nice comments and not the home truths. And the expensive cars you all run. Never mind the poorest in society are using food banks and have to pay council tax. If you’ve reserves set aside and earmarked for schools why aren’t you paying for Helston College repairs, there need is greatest.

  • Gill Zella Martin

    It makes sense to me. I think what some people may possibly forget is councillors can be tax payers themselves, therefore what ever financial decisions they make could affect them as well.
    As for Mr Cameron’s ill informed comment that Cornwall Council are sitting on reserves whilst making cuts to services, I think this does not bode well for his understanding of budgeting for the country efficiently.

  • Andrew Wallis

    I think you need to think before you post. Most of your comments are full of inaccurate, and myths. Let me deal with this latest comment

    1) What meal allowance? I bring in my own lunch.
    2) There is no bottle water at County Hall – the water provided in certain areas is from the mains.
    3) Expensive cars? Again you are mistaken. Not one member gets a car. If you see a nice looking car, that person has brought it out of their own money.
    4) Helston School – I thought I have explained before. The Government provides money for school rebuilds. It hasn’t been the responsibility of the Council to fund this since 2000 when the grant for rebuilds was taken away by the Government. The Government also gives the LA money for maintenance. However, like rebuild money, this has been underfunded for years. Or how else do you end up with a £60m maintenance backlog?
    5) A further point, it you raise the issue about Council Tax rises. In fact, if we had to pay for the school rebuild, your tax would rocket to pay for it. Or are you now endorsing such a large rise.
    6) Consultants are used when certain expertise is needed. It is cheaper than having someone employed. This Council has heavily reduced the number of consultants.
    7) Agency staff is needed to cover staff shortages or increased demand, especially at seasonal times. Again, like point 6, this is cheaper. If we just employed everyone, then point 5, would have to rocket.

  • Gill Zella Martin

    Fred, maybe you should be aiming your criticism at your local MP, as opposed to Councillor Andrew Wallis. You seem to be ignoring a major fact that Cornwall Council have been, still are, and will continue to be, grossly underfunded by central government. In my view it is the government that should show cognizance to Cornwall and allocate it a proper rural allowance. Their current understanding of the problems Cornwall faces appears incredibly limited.

    Personally, I think that as your comment is not just ill informed but actually rude and disrespectful, you should apologize to Councillor Andrew Wallis.

  • Fred

    Gill why should I apologise for having an opinion my comment is not rude. You wouldn’t apologise to a Cllr on a public website for having an opinion whether your comment was rude or not.

  • Fred

    Cllr Wallis I don’t believe theres no bottled water at county hall for there use.

  • Fred

    Andrew Wallis
    11:27 Wednesday, May 27, 2015 at 11:27
    I think you need to think before you post. Most of your comments are full of inaccurate, and myths. Let me deal with this latest comment

    You’re comments are full of inaccuracies.

  • Gill Zella Martin

    Fred, I have apologized on a public website in the past, as with hindsight I thought one of my comments was innapropriate, however, I was not, and would never be, deliberately rude or unkind. Therefore your comment is untrue.

    Your last post to Councillor Andrew Wallis is in my opinion, rude, unkind and untrue.

  • Fred

    Why should I apologise to the Cllr, what’d be the point, he doesn’t accept apologies, did he accept your apology before then when you said you apologised when you thought your comment was in appropriate? Has he ever accepted an apology from you? He asked for an apology from Fiona Ferguson but he didn’t accept it.

  • Fred

    No answer about the hidden bottled water at County Hall then by the Cllr.

  • Val Thomas

    Basically sounds like it makes sense, just a little disconcerting about paying out for insurance claims, I hope these are kept to a minimum and fully checked.

    Fred I think should take advice given and apologise.

  • Andrew Wallis

    As you said, if it is hidden, I do not know about it. I must not be on the need-to-know list for the secret stash of bottled water…..

  • Andrew Wallis

    I will correct you again Fred, Cllr Ferguson did not apologise, therefore, I could not accept one….though if she has of, I would have accepted.

  • Gill Zella Martin

    Fred, I have not been rude to Councillor Andrew Wallis or ever been asked to apologize, if I was, then I of course would, (or any other councillor) therefore your questions are not relevant.
    With all the in depth explanation about the council reserves, I am astounded you are so interested in bottled water that clearly does not exist. I believe you and Councillor Fiona Ferguson have something in common, I think you both make irrational and untrue comments and when proved wrong do not have the decency to apologize.

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