Cash reserves should not be used as “polyfilla”

By Elgan Hearn, Local Democracy Reporter

Councillors on the Audit Committee believe Powys County Council needs to learn lessons from the first council in the UK to become essentially bankrupt, Northamptonshire, or face a similar fate.

The Audit Committee met to seek assurances about this year’s current financial position and how it will affect next year’s budget.

Audit committee chairman, Cllr John Morris, said: “It’s important to note that any overspend this year will have a knock-on effect on next year’s budget and we already know it’s not going to be an easy budget either.”

Deputy chief executive, David Powell, compared the financial position this year and last year when more funding appeared from the Welsh Government, just before the budget was set

Mr Powell said: “The projected position as of the end of August is a £5.82 million projected overspend.

“However if this maintains it will have an impact on reserves.

“To be clear with the Audit Committee, The council is not going to go broke.

“We’re not staring at a position like other councils such as Northamptonshire.

“We have reasonable reserves, but they have diminished.

“The overspend projection is remarkably similar to last year (£5.81 million) but at the end of the financial year it all came good.

“We were supported by the Welsh Government who gave us some unexpected funding as did the vast majority of councils.”

The unexpected windfall Powys received was £3.2 million.

Mr Powell continued: “Our reserves total £28.8million which includes the Housing Revenue Account and Schools which we cannot dip into.

“The projected reserves is just over £18 million after we fund the projected overspend if we carry on as it is and agree to use the reserve.”

Mr Powell added that they were now able use cash received for selling assets for revenue purposes if it is for “transformational purposes”.

Cllr Michael Williams added that several councillors had attended a training session where Northamptonshire had been a case study.

“£50 million can disappear very quickly,” said Cllr Williams

Cllr Williams also believed that taking money from the reserves could not be used as a financial “polyfilla”.

Finance Portfolio Holder, Cllr Aled Davies, said: “We can’t go on without major transformation or we’ll run out of cash.

“Every year there is a degree of transformation and we have to speed up that process making huge changes in a very short time to secure the council’s future and ensure we deliver sustainable services.

“There will be extremely difficult decisions and all the councillors will need to understand them.

“We’re almost funding yesterday’s council not tomorrow’s and we need to rectify that.”

Cllr Davies added: “Northamptonshire example to a degree is relevant to Powys and a failure to deliver a balanced budget year on year.

“This is why I stress the importance of change.

“We have to live within our means, we have to deliver services with the amount of money we get.

Cllr Morris closed the meeting by saying that a copy of the training seminar which included Northamptonshire would be sent to the cabinet.

Cllr Morris read out parts of the report  on Northamptonshire when inspectors deemed it must go into special measures earlier this year.

Cllr Morris added: “We are in a dangerous position as a council.

“We are not in that position, but we could be.”