1. What discussions has the Minister held with colleagues in local government about the use of financial reserves? OQ58771

I have discussed local authority reserves with leaders as part of our ongoing discussions on pressures and funding. All leaders have stressed that they are already using reserves to manage their current pressures and expect to have to continue to do so next year. 

Thank you, Minister. Minister, in March 2020, the Welsh Government reported all local authority reserves to be £1.5 billion, which increased by 42 per cent to £2.13 billion by March 2021. To put this into context, in this current financial year, the revenue support grant allocated by you to local authorities was £3.9 billion. I accept that local authorities need to hold money in reserve and it's not a simple matter as to how those reserves can be used, but, as you discuss the overall financial position with local authorities over the next month, would you assure the Senedd that vast sums of money will not just be left in local authority bank accounts whilst council leaders at the same time complain about the lack of money to provide essential services? Thank you.

I'll just refer the Member to my original answer, which does reassure colleagues in the Senedd that I do discuss local authority reserves with them regularly as part of our general discussions in relation to finance. But I just want to be really clear as well that the position that is reported in the annual reporting mechanism is only the situation on one day of the year—the end of the financial year; it doesn't reflect movements up and down within the year. And, of course, the level of reserves are a matter for the individual local elected members and they will reflect the longer term plans that those authorities have as well as managing the short-term pressures, and there are plenty of those short-term pressures at the moment.

And I think that we need also to see local authority reserves in the wider context in terms of the overall budget of local government. At an all-Wales level, the widest interpretation of usable reserves is 26 per cent of the total annual expenditure. So, that's three months' provision for the costs of all of local government. General or unallocated reserves would cover just 10 days. So, I think that, even though authorities' reserves are higher than they are normally, they still just recognise that there are many, many calls on those reserves. As I say, authorities are already using some of them to manage the extreme pressures of the cost-of-living crisis and the impact of inflation on local authorities, and I expect they would intend to do so next year as well. So, I just reassure colleagues, really, that I do have confidence that local authority colleagues are considering the use of reserves in an appropriate way, and to recognise as well that the level of reserves this year does recognise that, at the end of the financial year, previously, I allocated an additional £50 million to local authorities, bearing in mind that, even before the cost-of-living crisis and the situation in Ukraine, we recognised, because of the three-year spending review, that years 2 and 3 were going to be more difficult. So, I hope that that does put authorities in a better position than they would otherwise have been to manage the pressures next year. But, that said, you'll have seen that local authorities are telling us that they're already expecting to see a gap in funding of hundreds of millions of pounds, which is obviously of concern to them and to us.

Thank you for confirming what I've actually heard in briefings that have been made available to me and to other Senedd Members of other parties about not just the financial budgetary pressures facing local authorities, but also discussing the reserves. And that figure that you've cited, that if it was all thrown at the current pressures, we might have three months before all those reserves are used up, regardless of the fact that most of it is currently allocated for other uses—. So, can I ask, in your meetings with local authority leaders going forward, particularly Andrew Morgan of Rhondda Cynon Taf and Huw David of Bridgend in my areas, could you ask them, if there were any Members of this Senedd—some of whom are former council leaders—who were unable to attend those briefings, and to see the scale of the pressures that are currently facing our local authorities, to invite them again to sit down with officers in that local authority and just see how far the reserves would go?

Absolutely. I think local authorities have been incredibly transparent in terms of the financial challenges that they're facing, and I'm pleased that they have been able to offer, on a regional basis, opportunities for all Members of the Senedd to better understand those pressures at a very local level. I know they'd be more than happy to engage again with any colleagues who have not managed to attend one of those sessions. I think, in those sessions, you'll have heard that they will have seen pressures right across local government, but particularly in relation to pay inflation, energy costs, schools in particular, social care, the response to Ukraine and wider migration, and also housing and homelessness, and, obviously, all the challenges around the tight capital settlement as well. So, I would absolutely encourage all colleagues to engage with their local authorities to get underneath those challenges.