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Powys finance chief says not ‘prudent’ to use reserves over tax hike

IT would not be “prudent” to use money held in council budget reserves to “counteract” any increase in Council Tax, a finance chief has said.

At a meeting of the Governance and Audit committee on Friday, May 6 members looked at the Audit summary and risk review by Audit Wales on Powys County Council’s 2021/2022 accounts.

The documents show that as of the end of March 2022, the council held £59.5 million in usable financial reserves.

This equates to 21.1 per cent of the council’s annual spending on services which was £284.17 million for that year.

These reserves are split into different pots, covering schools, housing, transport and those held departmentally.

Beside these sits the “general reserve” which could be used to cover shortfalls across any area of the council.

The figures were brought to the committee’s attention by Conservative Cllr Pete Lewington.

Cllr Lewington said: “Does this mean we’re charging a higher level of council tax instead of using reserves.”

Cllr Pete Lewington

Finance portfolio holder Labour’s Cllr David Thomas said: “The general fund reserves is kept for unforeseen events is only just over £9 million.

“That’s very low.”

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He added that the last time he’d “looked” Powys had the seventh lowest general reserve fund out of the 22 Welsh councils.

Cllr David Thomas

Cllr Thomas said: “I don’t think it will be prudent or good budgetary management to start thinking of using a reserve that is there for the unexpected and is already very low to actually counteract any increase in Council Tax.”

He added that despite inflation running at over 10 per cent that contributed to increasing the cost of services the administration had set Council Tax at five per cent in February – with 1.2 per cent of this rise needed to deal with the increase in the fire authority levy.

“This was quite an achievement in itself, ” said Cllr Thomas.

Head of finance, Jane Thomas added that “number of specific” reserves had been set up to deal with the cost of living crisis and spiralling energy costs.

Ms Thomas: “Part of budget setting each year is that we have to consider the level of risk in our budget plan and how we manage that risk and whether the level of reserves we hold are appropriate in terms of that budget plan.

“That is an annual review when the council gets advice from me as the s151 officer and whether the level of reserves we hold is appropriate.

“It will be different for every council across Wales depending on their individual budget plans so there’s not a direct comparison.”

Following the use of reserve funds during the last year, the overall total of the council’s reserves by the end of March 2023 is predicted to be £49.056 million with the general reserve fund standing at £9.333 million.