Shropshire Council to use £19 million of reserves to protect services

Shropshire Council is facing a shortfall in funding of £36 million for the next financial year and part of its plan to avoid large cuts to services is to use a combination of its reserves.

James Walton, the authority's head of finance, governance and assurance, said the proposal, which is intended to ensure the council is on sound financial footing for the future will still require some service cuts.

Last month auditors Grant Thornton concluded that plans to use reserves to plug a multi-million pound hole in the council’s budget were a risk, but were “sufficiently mitigated” by plans to reduce costs and increase revenue.

The plan is set to be agreed at Shropshire Council's cabinet tomorrow.

Mr Walton said: "Shropshire Council’s plan to deliver long-term financial sustainability is being finalised over the autumn and cabinet is due to consider the output of this work in December. This plan is primarily being built around innovation and income generation, but will require service cuts and use of one-off funds to ensure a balanced budget can be achieved.

"The council’s finances are reviewed on a regular basis and the latest financial strategy provides the first detailed refresh of the council’s financial position since February 2017. Increased pressures and inflationary costs as well as reductions in funding have all contributed to a widening of the funding gap. The 2018/19 financial year has seen the funding gap grow from £24m to £36m.

"The approach adopted by the council has been to protect service delivery in the short-term by using one-off funding and reserves to temporarily close the funding gap, thereby enabling a longer term, more strategic approach to achieving financial sustainability to be developed."

Mr Walton said the council had built up reserves over a number of years which are now being used.

He said: "In general, one-off funding is provided through central government grants (for example Rural Services Delivery Grant) that are only guaranteed for a short period of time.

"The council has also built up reserves for a period of years, which are now being applied. In 2018/19 £6m of earmarked reserves have been freed up and are being released to help cover the funding gap.

"A further £13m of reserves are also due to be released on the condition that they can be replaced by alternative one-off funding.

"Primarily this replacement comes from additional powers provided to the council to use capital receipts to fund certain types of expenditure. Approximately £11m of these reserves relate to general fund expenditure, such as the council’s Digital Transformation Programme, and £2m relates to pension fund contributions; these as a result of the 2016 actuarial valuation."