Pickles calls on councils to use reserves to ease short term pressures

Local authorities should consider temporarily using their financial reserves to address short term costs and pressures, with a view to building them up again “in the sunnier days to come”, the Communities Secretary has claimed.

Eric Pickles said English local authorities currently have around £10bn in reserves for the period 2010/11. More than 50 councils have reserves in excess of £50m.

According to the Department for Communities and Local Government, ministers consider it “sensible”, as part of wider financial planning, for council treasurers to draw on these reserves to implement restructuring and invest now to make savings in the longer term.

The DCLG also pointed out that low interest rates had significantly reduced the revenues from council reserves.

The Communities Secretary said: "Good financial planning is about putting a little extra away when the sun is shining so you have some cover during the rainy days.

"But building up reserves isn't simply about turning town hall vaults into Fort Knox. These untapped funds exist to ensure councils can respond to unexpected situations like the pressing need to tackle the nation's unprecedented level of debt.

"Just like any household facing challenging times, all good councils should be considering the merits of temporarily dipping into the money they have set aside as part of their plans to address immediate financial challenges, with a view to building up their reserves again in the sunnier days to come."