To note and review the earmarked reserves held by the council. 

The member for finance and corporate services introduced the report.  It was confirmed that Appendix 1 contained the rationale for each earmarked reserve alongside the context regarding why it was maintained at a particular level. 

It was confirmed that a review of the reserves was undertaken annually by the S151 officer as part of the budget setting process.  The review confirmed that the reserve balances were commensurate with risk, that they were adequate and robust. 

It was highlighted that the council’s usable revenue reserves were split between the general reserve ‘the general fund’ and earmarked reserves that are held for specific purposes. The general fund reserves are maintained at a minimum level of between 3 and 5% of the net revenue budget.  As of 31 March 2024, the general reserve balance totalled £9.6m which was 4.5% of the council’s 2023/24 net revenue budget.  Appendix 1 also set out the categorisation of the council’s earmarked reserves for 2025/26. 

The reserve balance on 31 March 2024 totalled £73.2m.  This included £17.3m of grant funding carried forward to 2024/25 and represented grant funding that was received with no outstanding grant conditions attached but hadn’t been applied to relevant expenditure.  It was confirmed these amounts are treated as earmarked reserves which will be carried forward for application in future accounting periods.

Annex A, Appendix 1 showed the forecast earmarked reserve balances for 2024/25 and 2025/26 financial years.  At 31 March 2025 the forecast earmarked reserve balance will be £65.5m and £55.6m at 31 March 2026. It was noted that the Quarter 2 2024/25 budget report presented at cabinet in November 2024 reported a forecast overspend of £10.2m before management action, estimated at £8.2m, reducing the forecast overspend to £2m. It was confirmed that any overspend in 2024/25 would be funded using the council’s available reserves and a review of the reserve balances will be undertaken when finalising the out turn position for the year. 

The risk assessment for 2025/26 determined that a general fund balance of £9.6m (which was unchanged from 2024/25) should be maintained.  This is equivalent to 4.1% of the proposed operating budget of £231.5m for 2025/26. 

It was noted that cabinet approved the transfer of £11m from the business rates risk reserve to establish a budget resilient reserve or contingency reserve to mitigate against in year cost pressures and volatility in demand across social care budgets in 2024/25.  The remaining balance will be carried forward on 31 March 2025 in the budget resilience reserve to manage future emerging risks and in year budgetary pressures over the medium term.

It was confirmed that allocation of reserve funding in each financial year will require applications to the council's S151 officer and cabinet approval.  This will ensure the appropriate measures have been taken within each directorate.   Any unused balance will be considered as part of the annual review of earmarked reserves.

It was noted, that excluding schools’ balances, earmarked reserves were forecast to be £55.6m on 31 March 2025 and £45.7m on 31 March 2026.  It was confirmed that this did not consider the cumulative dedicated schools grant (DSG) deficit.  This was accounted for as an unusable reserve as permitted by statutory instrument. 

The general fund balances was forecast to be maintained at £9.6m to 31 March 2026. A description of each reserve, an explanation of risk to be managed and mitigated was detailed in Appendix A. 

There were no comments from cabinet members.

Group leaders gave the views of their groups. The report was welcomed and noted it was a clear report.  Further information was requested regarding unused grants carried forward at £17.3m and the other reserves individually under £1m.  Particularly regarding what the restraints or the plans were regarding its spending.

In response to queries it was confirmed that a detailed breakdown would be provided regarding unused grants and other reserves. 

Councillor Stoddart proposed the recommendations, and it was unanimously resolved that the following be recommended to Council

That:

a) The earmarked reserves and balances held by the council at 31 March 2024 are reviewed and confirmed as prudent to meet future financial commitments and risks; and

b) The Earmarked Reserves and General Balances Policy Statement 2025/26 is approved and forecast balances to 31 March 2026 are noted.