This is a shortened version of the notes for the Residents’ Group at the debate into the Council’s “Medium Term Financial Strategy” at Policy and Resources 8th December 2005. I did not deliver them verbatim, but summarised them instead. The Financial Strategy is, in effect, the beginning of the Council’s budget process, and the notes are published here, in order to assist the public consultation which has been ordered.

Our concerns relate to the high level of our reserves, and the contributions which continue to be made from Revenue.

1. Our £8.6M reserves exceed our revenue budget. We understand that, at Town Council level, Councils are being advised that their reserves should not exceed 20% of their Revenue budget.

2. This being the case, we question the wisdom of transferring further amounts from Revenue into Reserves.

3. In 2004/5, there was an interest receipt from the investment of reserves and other money in the sum of £592K (Page 17). Only £100,000 of this was used for revenue expenditure: the rest was put into reserves. The amount of interest projected for this financial year is £571K.

4. Pages 14 and 15 describe the Council’s Reserve funds. These include a General Reserve of £799K, Repairs and Renewals Reserve, and an Improvement Contingency and Emergency Fund.

5. Of these, the General Reserve is the fund which is usually used for dealing with Contingencies and Emergencies. However, a new fund was set up this year as a “ Improvement, Contingencies and Emergencies” reserve. This fund was set up from a surplus which arose on Revenue Account.

6. The Repairs and Investment Account is interesting. Reference is made to Page 15 and Appendix C. This shows an annual payment from Revenue of £209,000. This means that over the next three years the fund will grow by £627,000, while the projected expenditure is £400K. The result is that the fund, which started at £ 876K on April 1st 2005 will grow to £1,003,000 by 31st March 2008.

7. The maximum amount of expenditure in any year is £300K – and that was meant to be spent this year. In fact, it is understood that only £25K has been spent so far – so there is some slippage.

8. Obviously, there needs to be a margin for error to guard against wholly unexpected contingencies, and whilst we can see the need to cover the Council twice over, we cannot see the need to cover the Council three times over. In the most unlikely event that the Council might suddenly be faced with over £600K’s worth of repairs in any one year, the General Fund exists to provide a safety net.

9. My next point: I refer to Appendix A. This refers to a payment in regard to recycling of £100K. As it is not repeated in subsequent years, one assumes that this is a one off payment. As I understand it, all one-off payments can be paid from capital, and do not have to come out of Revenue.

To summarise, the following moneys are being paid from Revenue into Reserves, when there seems to be no need to do so:

Interest £471K

The balance remaining from last year’s surplus on Revenue Account 75K
(the “Improvement, contingency and Emergency” Reserve)

Annual contribution to Repairs and Renewals Reserve 209K

Total: £755

In addition, there may be at least one one-off payments which could be taken from Capital (possibly recycling) 100K

There is therefore, perhaps, more than £855K available for revenue expenditure – at least 12% or more of the Council’s Revenue budget.

Now we accept that there may be an advantage in keeping Council Tax in line with inflation – as otherwise Government grant can be lost, and there are consequences in regard to Council Tax capping criteria etc. So, while we would reluctantly accept an increase in the Council tax of no more than inflation, we cannot accept any suggestion of reduction of services or staff cuts or any increase above inflation of fees.

In other words, if there is a gap between income from Council Tax and fees and Government grant, that gap must be met by an adjustment in the amount of revenue which this document shows as being transferred into reserves.