RESERVE LEVELS

Question

My Council seems to justify significant increases in its general reserves citing the possibility of extra costs being dumped on us by say S114 notices or deregulation .  How real are these threats or is it NALC  scare mongering .  I assume a S114 notice comes with conditions but is there really any chance of the Council not paying a PC its precept ?  Would appreciate an informed view of the risks.  Personally I see a PC as a self governing entity and that no-one can dump anything on us that we don't want.

Answer 1

I don't think a s114 notice suggests that a principal authority won't pay over a precept to a parish council.  It simply means it can't balance its books and I haven't seen any advice from NALC or anyone that suggests parish councils will be affected by a principal authority issuing a 114 notice.  However, whether the principal authority is in dire financial straits or not, it is clear that many principal authorities are having to reduce their costs so the services they provide are being reduced accordingly.  Whether it matters depends entirely on your parish council's views on some of the cut backs.  Locally, grass cutting of public spaces has been reduced from once a fortnight to just three times during the growing season.  Does it matter?  Maybe to some places it does in which case paying for additional grass cutting might be something your parish might wish to do so having reserves you can use for that could be useful.  It is entirely your choice.

Answer 2

There is an LGA briefing note on this subject from December 2023 here: https://www.local.gov.uk/about/news/section-114-fear-almost-1-5-council-leaders-and-chief-executives-after-cashless-autumn#:~:text=A%20section%20114(3)%20report,available%20in%20a%20financial%20year.

The next post will provide a link to a House of Commons library briefing note from September 2023 (can't put 2 links in 1 post)

Neither of these authoritative references make any mention of 'compulsory' devolution of higher tier local authority liabilities downwards to town or parish councils.  There simply is no 'mechanism' for compulsory delegation so any additional responsibility taken up by a lower tier would have to be an entirely VOLUNTARY action and would - in effect - result in precept rise and double taxation of the poor tax payer.

Since there is no limit on a town or parish precept, this is a dangerous and uncontrolled path towards stealth tax with unlimited ceiling.

Your council must have Cllrs that are either high tax high spend Labour types or they are blissfully unaware of the consequences of what is being sold to them. 

Local authorities have legal obligations to provide services - they cannot unilaterally delegate those obligations to a lower tier - the opposite is actually true, the liability shifts UPWARDS rather than downwards...

Sounds like smoke and mirrors from whoever is trying to justify a rise, or a sustained unjustifiable level, of reserve.

Answer 3

HoC Library briefing note:

https://commonslibrary.parliament.uk/what-happens-if-a-council-goes-bankrupt/

Answer 4

This one makes for interesting reading too....

https://www.newstatesman.com/spotlight/economic-growth/regional-development/2024/01/council-bankruptcy-tracker-local-government-authorities-finances

Despite what popular commentators might want you to believe (central government cuts) there is a common trend of exceptionally poor management, flawed decision making, bad investment strategies and poor project management which run as a common theme through Nottingham, Birmingham, Woking, Thurrock & Croydon...

But then LAs always manage to pull a golden goose out of somewhere to mask their systemic, entrenched and engrained incompetence and inefficiency - Austerity, Covid, Central government cuts always 'somebody else's' fault never their own....