Hartlepool council defends Â£52m reserves amid council tax rises
Hartlepool Borough Council has defended the use of its reserves after it was revealed the authority's funds had grown by almost Â£20 million in the last ten years.
A Freedom of Information request submitted by Hartlepool resident James Barker showed the council’s reserves had grown from £32.2m in 2007 to £51.9m at the end of last March.
Mr Barker said it was “absolutely disgraceful” as council tax is expected to go up again this year, and said the money in the bank could have been used to prevent service cuts in recent years.
But Chris Little, the council’s director of finance and policy, said much of the reserves are committed to be spent in the next three years including supporting the council’s budget because of ongoing government funding cuts.
Mr Barker said: “I have seen for myself just how the impact of cuts to local council services have affected the people in Hartlepool, many of Hartlepool’s low paid and vulnerable residents have seen cuts to their Council Tax support, forcing many who are financially unable to sustain themselves, forced to find even more money to pay their local council for what is effectively a skeleton service.
“I find it absolutely disgraceful to hear that come April 2018, Hartlepool Borough Council will be asking for yet another council tax increase when they have amassed £52 million in savings, savings which could have been used protecting some of the essential services that we have now lost.
“I would hope that by this information coming into the public domain, it will make residents think carefully about whether or not an increase in Council Tax for 2018 is justified and whether or not Hartlepool Borough Council are managing our council tax funds wisely and in a way that best serves the towns interests.
“There will be many residents after seeing what Hartlepool Borough Council are holding in savings will ask the question why have they not spent this on our town, however I suspect the majority may say enough is enough.”
A review of the council’s reserves that went before councillors in November showed they had reduced by £8.924m on the previous financial year.
By the end of March 2021, the reserves are due to reduce from £51.9m as of March 2017 to £13.8m.
Mr Little said the build up of reserves has been part of a plan to deal with the effects of less government funding.
He said: “We have put money aside when we could from one off opportunities.
“The plan is it’s now going to be spent. If we didn’t have that money we would have been in financial crisis.”
The council said a direct comparison of reserves over the last ten years cannot be made as they are held for different purposes and to manage different financial risks.
The authority says its long term approach to managing its reserves has allowed it to buy it some time and protect services.
Mr Little added: “It’s part of a plan where we haven’t looked at the budget a year at a time.
“We have taken long term choices to put the authority in the best position we can against a really difficult background of continuing government grant cuts.”
Between April last year and 2019-20, the council will use around £10.5m of its reserves to mitigate government cuts, less business tax from Hartlepool power station and deal with increasing costs for children in care.
There is no set formula for how much money councils should have in reserves.
The council’s financial plans are based on a 4.9% increase to council tax, including 3% for social care, from April, which is yet to be formally approved by the council.
Mr Little said there has been a massive shift in government funding policy meaning more of the council’s income has to come from council taxpayers.
He said: “If reserves were used to avoid council tax increases all it would do is defer cuts in services that were significantly greater.”
The council’s reserves consist of six different components for different things.
1. Unearmarked General Fund. 2017 balance - £4.526m. 2021 forecast £4.526m
The council’s ‘rainy day’ fund for unexpected emergencies such as major floods.
2. Budget Support and Investment Reserves. 2017 balance - £15.227m. 2021 forecast - £0
Money that will be used to support the council’s Medium Term Financial Strategy and one-off investments in capital projects.
3. School Balances. 2017 balance - £2.439m. 2021 forecast - £2.439m.
Money held in trust by the council for town schools to spend as they choose.
4. Housing Revenue Account. 2017 balance - £538,000. 2021 forecast - £385,000.
To manage risks associated with the council’s housing stock.
5. Earmarked Capital Reserves. 2017 balance - £6.295m. 2021 forecast £0
Grant money from outside sources already committed for longer term capital projects.
6. Earmarked Revenue Reserves. 2017 balance £22.910m. 2021 forecast - £6.457m.
Money to manage spending on projects over one financial year. This fund includes £4.4m set aside for insurance claims against the authority, £4.4m for council redundancies and early retirement. Also includes £5m of grants.