Agenda item

To consider the range of reserves held by Wokingham Borough Council.

The Committee considered a report, set out at Agenda pages 29 to 40, which provided a summary of the Council’s financial reserves.

Graham Ebers (Deputy Chief Executive and Chief Finance Officer) and Imogen Shepherd-Dubey (Executive Member for Finance) attended the meeting to present the report and answer Member questions.

The report stated that the term “reserves” applied to both the General Fund reserve and earmarked reserves.  Earmarked reserves were reserves allocated to ensure that there were sufficient funds available to cover specific risks. In some cases, these reserves had been built up over a period to cover a specific expenditure the Council expected in future years, in order to smooth the revenue impact. The General Fund reserve covered more general risks that may be faced across the Council. The Housing Revenue Account had its own separate reserves. There are also reserves associated with the Dedicated Schools Grant.

The report stated that part of the role of the Chief Finance Officer was to assess whether the level of reserves was adequate. This assessment was carried out in conjunction with relevant lead officers. The Chief Finance Officer had a statutory duty to ensure the Council’s finances were “fit for purpose” under Section 151 of the Local Government Act 1974. The Council’s Medium Term Financial Plan (MTFP) included details of the various reserves and their projected balances. Appended to the report was a table which set out the type of reserve, its justification, the estimated balance at 31 March 2024 and any ongoing financial risks.

The report stated that the requirement to ensure fit for purpose finances was reinforced by Section 114 of the Local Government Finance Act 1988. This required the Chief Finance Officer to report to Members if there was, or was likely to be, unlawful expenditure or an unbalanced budget. This would include situations where reserves had become seriously depleted and it was forecast that the authority would not have the resources to meet its expenditure in a particular financial year. The report detailed the overall position and considerations taken in respect of reserves and how the financial values required were set strategically to balance the level of risk from across the organisation’s operations and approach to investment.

In the ensuing discussion, Members raised the following points and questions.

How did the Business Rates Reserve operate? It was confirmed that this reserve mitigated against risks such as changes in collection rates, the level of appeals and bad debts and changes in Government policy on rates payable. At present, the Council was able to retain 49% of the Business Rates collected. Associated risks including the over-charging of Business Rates – one Council had faced a £10m cost.

In 2022/23, the Waste Equalisation Fund had been used to support other Council expenditure. What level of flexibility existed in relation to the use of the various reserves? It was confirmed that the level of flexibility depended on the type of reserve. The Executive and Council held powers to authorise the transfer of reserves to different areas. Decisions to increase or reduce reserves were reflected each year in the MTFP. This followed considerations about affordability and the balance of risk, for example the impact of Covid-19, the war in Ukraine, the cost of living crisis and the risk of contractors going bankrupt.

In addition to the reserves set out in the report, did the Council hold any other reserves? It was confirmed that the reserves outlined in the report related to Revenue. The Council also held earmarked Capital reserves of £7.9m. The total level of Revenue reserves was around £100m against the Council’s net operating costs of around £140m.

RESOLVED That:

1)     Imogen Shepherd-Dubey and Graham Ebers be thanked for presenting the report and answering Member questions;

2)     the reserves position set out in the report be noted in the context of the strategic approach to setting the MTFP for 2024/25;

3)     the level and sufficiency of reserves be noted as part of the annual disclosure in the MTFP and the process for setting a safe Budget for 2024/25;

4)     the Committee receive an annual update on the Council’s Revenue and Capital reserves, including details of variations from year to year.