Derby City Council

Council’s Financial reserves plummeting!

Since the Tories took control of the Council in May 2018, the usable revenue financial reserves level has rapidly declined despite an increase in overall funding.  The budget paper to be presented to the Cabinet on 16th December 2020 shows this continuing trend and raises many questions.

In March 2018, at the tail end of the Banwait Labour administration,  I wrote an article “Council budget reserves increased by £46m since 2010 – so why the continuing cuts to services?” which was feint praise for the administration’s financial prudence in the context of draconian cuts to services. Since 2018 the funding for the Council has markedly increased.

The funding of £238.2m for 20/21 used in the chart was before Covid. Additional grants have been received to cover extraordinary costs in that year. For 21/22 – the figure includes ~£8m for Covid Costs – hence the spike.

The corresponding position for revenue Usable reserves is:

The General Fund element of the above charted data, covers “Strategic and operational risks” which is set between 3-5% of the net budget. From 2016-18 this was gradually built up to the ~5% level. In 2020/21 the new Chief Financial Officer recognised that it was in excess of the minimum and decided to reduce it, by transferring £2m to the Budget Risk Reserve. It is now at 3.4%

Despite the Council forecasting a ~ £7m overspend in 20/21, the reserves chart in the lastest papers indicates a different angle with the Budget Risk Reserve being reduced by nearly £14m.  In future years this is expected to reduce to ~£1m, at it’s peak in 2018 it was ~£36m!

Comment

Undoubtedly costs continue to increase,  but then so does funding. A further £8m has been budgetted in 2021/22  for Children’s Services in the context of a balanced budget.

This is not a blip in the level of reserves but a long term trend downwards….and should concern every Councillor…as well as City residents.

Where is the money going? Do the Councillors know why the Usable reserves are plummeting?

Categories: Derby City Council

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