The LGA has warned that reserves “can only be spent once” in response to calls from ministers for councils to use them in response to current funding pressures.
Announcing an additional £600 million for councils in 2024/25, Levelling Up, Housing and Communities Secretary Michael Gove emphasised that all funding in the local government finance settlement “should be used by local authorities to deliver the frontline services on which our communities rely, rather than to be put aside for later use”.
Mr Gove said his department would “continue to monitor the level of local authority reserves”.
At the LGA’s annual finance conference in January, Local Government Minister Simon Hoare noted that reserves overall have increased since the pandemic and that they are “there to be used”.
However, in its submission ahead of the Budget on 6 March, the LGA has reiterated that drawing on reserves is not a sustainable solution to current budget pressures.
In his letter to Chancellor Jeremy Hunt, LGA Chair Cllr Shaun Davies said: “Use of reserves may provide a degree of resilience over the short term, but this is only temporary, as reserves can only be spent once.
“If councils use reserves repeatedly to offset recurrent pressures, they rapidly find themselves still having to address unfunded pressures, but now also with depleted reserves.
“Furthermore, not all councils have seen reserves growth, while others have seen growth from a very low base. Councils should be provided with additional recurrent funding rather than encouraged to use their reserves.”