Financial Reserves

Part of 1. Questions to the Minister for Finance and Local Government – in the Senedd at 1:31 pm on 30 November 2022.

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Photo of Rebecca Evans Rebecca Evans Labour 1:31, 30 November 2022

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.