Council reserves expected to shrink by 75% over next two years

Caerphilly Council is forecast to spend around three quarters of its reserve funds over the next two years.

Cabinet members met on Tuesday February 24 ahead of a final budget vote to discuss the health of the local authority’s reserves.

The use of the council’s rainy-day and contingency funds have long been a topic of some disagreement, with opposition members arguing the council should spend more rather than cut services or increase council tax.

But the Labour-run administration argues the money can only be spent once and most of its reserves sit in earmarked or ringfenced accounts.

Cllr Eluned Stenner, the cabinet member for finance, said reserves “play a vital role in supporting our financial sustainability, enabling the delivery of key services and ensuring the council can respond effectively to financial pressures and unforeseen events”.

She said the council’s reserve balance stood at more than £169 million last March but was expected to fall to less than £43 million by March 2028.

The majority of that reduction will be in ringfenced reserves “as we deliver key capital infrastructure, maintain our housing stock to WHQS [Welsh Housing Quality Standard] and deliver new homes”, head of finance Leanne Sykes told the cabinet meeting.

She added she was not concerned about the “planned, managed” spending of reserves that “reflects the use of funds for approved commitments and investments” and is monitored regularly.

“The key thing for me is we are not using reserves to balance the budget for 2026/27 which enables them to be used for one-off purposes that strengthens the council’s long-term financial resilience,” explained Ms Sykes.

Cllr Chris Morgan asked how the council’s position would have changed if it hadn’t needed to use reserves to balance budgets in recent years.

“Over the last three years we’ve used £30 million to balance the budget,” replied Ms Sykes. “That could have been used for investment, and it could have drawn in match-funding.”

Cllr Jamie Pritchard, who leads the local authority, said the handling of reserves was “often a hot topic of discussion, especially in the council chamber”.

“Once they’re gone, they’re gone”, he warned, adding that the “vast majority of the reserves are ringfenced”.

He said funds such as the Housing Revenue Account “can’t be touched in any way, shape or form”.

“It’s just a case of continuously explaining that to the public, who may see big figures in terms of reserves,” said Cllr Pritchard. “And who wouldn’t say £169 million is a big figure? But as Cllr Stenner has indicated, that’s projected to go down to £43 million, which is a quarter of that figure.”

All councillors are due to meet later on February 24 to debate and vote on the final budget proposals.