The authority in charge of looking after roads, schools, children and old people is “burning” through its reserves as the government continues to squeeze budgets, new papers have revealed.
Kent County Council’s financial position has “weakened significantly” because it has been forced to dip into its savings pots to balance the books.
KCC forecasts it will have spent just under one quarter of its usable reserves in the two years to April 2024, dropping from £408m to £316m.
This is making the council less resilient, said the papers.
KCC provides a range of vital statutory services such as adult social care, running schools and looking after vulnerable and asylum seeking children, as well as maintaining the county’s roads.
Cllr Harry Rayner, KCC’s deputy cabinet member for finance, said “discretionary” services, those provided outside the council’s legal obligations, will have to be targeted to make savings.
Cllr Rayner refused to name which might be culled to “to stop hares running” but said all areas are being considered. At any authority, discretionary services can range from tourism services to regeneration projects.
He added that having drawn down on reserves, the council will seek to replace them over five years.
Cllr Rayner said: “It will have to come as a reduction in discretionary services and a number of them are now under review.”
According to KCC auditors Grant Thornton, the council will need to find £86m in efficiencies next year because of a shortfall in government funding set against spiralling costs and soaring demand for services.
Papers to be considered by this week’s Growth, Economic Development and Communities Cabinet Committee on Thursday (November 9) state: “The levels of reserves now pose a more significant risk to the council’s financial resilience than levels of debt.
“Levels of reserves are now considered to be the second most significant financial risk after capacity to deal with in-year budget pressures.”
The council has already made moves to cash in on its property portfolio and has already put Sessions House, known as County Hall, on the market to raise funds.
The report, published by leader and deputy leader Cllr Roger Gough and Peter Oakford, says: “The financial standing of the council has weakened significantly as a result of the overspend in 2022-23 that was balanced by the drawdown of £47.1m from general and risk reserves (39% of general reserve and all of the risk reserve).
“Usable reserves were also reduced through the transfer of £17m from earmarked reserves to Dedicated Schools Grant (DSG) reserve as part of KCC’s contribution to the Safety Valve agreement with DfE in March 2023 (with further transfer of £14.4m planned for 2023-24).
“Overall, the council’s usable revenue reserves have reduced from £408.1m at 31/3/22 (40% of net revenue) to £355.1m at 31/3/23 (29.8% of net revenue) with further reduction to £316.3m (24% of net revenue) forecast for 31/3/24.”
The papers say that the “reserves will need to be replenished at the earliest opportunity and will need to be factored into future revenue budget plans”.
KCC’s £1.1bn borrowing requirement from historic and ongoing capital expenditure “is expected to remain broadly stable” and covered by existing external debt, which is forecast to decline.
Unlike other councils, such as Birmingham City Council, KCC has so far avoided having to issue a section 114 notice, which effectively is an admission an authority cannot afford to fulfil its statutory functions.
In the event of a section 114, the government appoints commissioners who take over the day-to-day running of the council.
One Tory backbencher said: “Some of us feel there is still an 80% chance we’ll end up having to issue a section 114 notice. We’re doing all we can to prevent it but you can’t keep burning through the reserves without putting the money back.
“At the end of the day, this is the government’s doing by not funding the council properly to meet the cost of services we have to provide by law. And it will be those who rely on discretionary spending who will end up paying the price.”