Liberal Democrats and Reserves

One of the principal flaws in the Liberal Democrats Budget proposals last night was their use of reserves, which betrays a fundamentally mistaken attitude to the use of balances.

The Lib Dems seem to see Council reserves as a pot of money to be squirrelled away for "a rainy day" in the words of Cllr Jack Beck.  In fact reserves should be used to cover likely risks.  Our risks are huge and growing, and the Finance Director has advised that we need to put more aside to deal with them.  They include possible overspends in social services, in building projects, political inteference by the government like George Osborne's in year cuts of 2010 and so on.

We need to keep a reserve so that we can manage these risks without a panic response.  For example at one point this year we had a forecast overspend of £7.1 million, compared to reserves of only £7.5 million.  If we hadn't tackled this overspend, we would have had to cut the budget by a further £7 million on top of the central government cuts of more than £40 million.

The Liberal Democrat proposals last night were to ignore the Finance Director's advice, and use the money to avoid making difficult decisions over, for instance, Charteris Sports Centre to keep it open a bit longer.  The trouble with this approach is that at the end of using up your reserves, and possibly exposing yourself if things go wrong, you still have to close the service because the reserves eventually run out.  Proposals to continue funding services, like libraries for instance, should not be made without any analysis of the quality or sustainability of the services, and they should not be made using one off reserves that cannot support ongoing revenue committments.