York finance officials in council cash warning (From York Press)

City of York Council finance officials in reserves warning

9:33am Thursday 6th September 2012 in News By Gavin Aitchison, gavin.aitchison@thepress.co.uk

YORK’S council reserves are at the bare minimum they should be, meaning any sudden costs could put extra pressure on other public services.

Finance officials at City of York Council say their reserves are at the lowest acceptable level, £6.1 million - five per cent of the council’s total budget.

All councils keep money in reserve to pay for unforseeable expenses such as emergencies, redundancy payments or sudden demands for funding, but officials have warned the ruling cabinet about possible damage if York had to use its reserves.

The warning has been issued in a written report by Debbie Mitchell, the council’s corporate finance manager; Andrew Crookham, principal accountant; Ian Graham, head of performance and innovation; and Tracey Carter, assistant director for finance asset management and procurement.

They said the February 2012 Budget Report agreed that £250,000 be added to the reserves to provide an “appropriate and prudent level of headroom”.

They added: “Members have to be mindful that any overspend would have to be funded from this reserve reinforcing the need to contain expenditure within budget.

“Should this happen the director of customer and business support services would have no option but to recommend to council that the reserve is reinstated to at least its minimum required level which would have implications on future budget setting cycles.”

Conservative opposition leader Ian Gillies said his party had warned against excessive borrowing and said the level of reserves was “of concern”. He added: “The Labour Cabinet need to act and take appropriate measures to prevent the appalling financial situation they have created becoming critical.”

Lib Dem leader Carol Runciman said Labour made “baseless saving assumptions” that they were now unable to achieve and said predictions of a £6 million budget shortfall this year, revealed by The Press on Saturday, were worrying.

She said: “We hope that Labour do not threaten the financial viability of the council by raiding the reserves in order to balance the books again. We are writing to the director of resources asking for an urgent update on how council spending will be brought under control.”

Council leader James Alexander said: “Labour's strategy is the gradual increase of reserves to ensure, like a well managed family budget or business, that money is set aside for a rainy day.

“Labour has been left sorting out the mess of insufficient reserves left by the Lib Dems, whittled away well before the current period of austerity was upon us. Conversely Eric Pickles has encouraged councils to dwindle their reserves, so perhaps the Lib Dems were following his advice.”

He said Labour increased the reserves by £250,000 in February, after the Lib Dems and Conservatives reduced them from £11 million to the minimum of £6 million between 2008 and 2011.

He said the Lib Dems opposed that increase and said: “People can see for themselves the difference between what the Lib Dems say and what they do.”