Norfolk County Council defends stockpiling £200m in cash pot

PUBLISHED: 06:30 02 October 2012 | UPDATED: 09:51 02 October 2012

Norfolk County Council has more than £200m in 'usable' reserves.

Norfolk County Council has more than £200m in 'usable' reserves.

Archant Norfolk Photographic © 2011

Council leaders have defended stockpiling £200m of cash in County Hall’s coffers at a time when services have been axed.

New figures have emerged which show, over the past year, an extra £50m has gone into Norfolk County Council’s usable reserves, hiking the amount in the bank from £155.8m in March 2011 to £205.1m by March this year.

The increase in those reserves, revealed in the council’s statement of accounts, comes at the same time as the county council is in the midst of making £135m worth of savings over three years.

Hundreds of jobs have been lost because of the cuts, which also saw the authority scrap its own youth service, reduce subsidies to rural buses and spending slashed on maintaining public rights of way.

But council leaders have insisted it makes sound financial sense to keep money in reserve, the cash could not have been used to save jobs and that it would ultimately be used to boost Norfolk’s economy.

They say the increase in the reserves is mainly down to the government providing more one-off cash for capital projects, such as highways maintenance and schools projects.

Derrick Murphy, leader of Norfolk County Council, said: “Much of the increase is due to a big rise in government money received by the county council for capital spending - this is funding for schemes which were not ready to proceed in the previous financial year, but which is now allocated to be spent in the current year and will largely be spent on improving facilities at our schools.

“Other significant spending increases which will be taken from reserves in the current year includes £3.5m of extra spending in highways maintenance, £3.5m from the Norfolk Infrastructure Fund, £3.5m to fund the ongoing transition of changes in adult social services and £2.5m put into a reserve for the Northern Distributor Road so that we won’t have to borrow as much money should the scheme go ahead.

“In essence, the rise is extra ‘one-off’ funding which cannot be used for recurring revenue spending such as on staff or services.

“Instead, it will be spent on a range of capital projects which will benefit Norfolk people by providing items such as road maintenance, improved school buildings and better broadband. This will provide a welcome stimulus and employment for construction companies at the same time.”

Mr Murphy added: “It is also prudent to have some money set aside to meet unexpected costs. The level of reserves is kept under ongoing review by councillors and reported regularly to them. Norfolk holds below average levels of reserves when compared to other shire authorities.”

While the county council has £205.1m of usable reserves, which is money which can be used to fund expenditure or reduce council tax, it also has £271.5m of unusable reserves. Unusable reserves comprise cash stowed away by law to back up various accounting procedures.

But Mike Brindle, leader of the Liberal Democrat opposition group at County Hall, said: “We think that some money needs to be made available to be spend.

“We would support the use of a proportion of the reserve to help the worst hit members of the community. At a time when most of us are feeling the pinch, they have absolutely nothing to spare.

“It is incredible to think that in the 21st century, we have people relying on food banks to eat and that’s before the changes to council tax benefit are brought in.”

But Jonathan Dunning, branch secretary for trade union UNISON at Norfolk County Council, said it was too simplistic to think the cuts his union had criticised could have been avoided by dipping into the reserves.

He said: “We do keep a watch on what they do and you can clearly say that, in hindsight, they cut deeper than they needed to do.

“But when they say these are usable reserves, that does not mean they can spend it on anything they like. Some of it will be tied up with capital projects and match-funding which they are committed to.”

Suffolk County Council has £158m in its reserves, which opposition Liberal Democrats earlier this year criticised as being “quite excessive”.

The government says determining the level and use of reserves is a matter for individual local authorities and there is no prescriptive national guidance on the minimum or maximum level of reserves.

However, in 2010, communities secretary Eric Pickles said that when times are hard, councils must not turn their cash vaults into “Fort Knox”, but use reserves to soften the blow of spending cuts.

But, last month, the Local Government Association warned councils’ cash reserves, which add up to £17bn across the country, would run out in five years if local authorities were forced to use them to cover the expected cuts in the money they receive from government.

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