Cost-of-living crisis: Scots councils 'sitting on '£500million funds

The Scottish Government and council umbrella group COSLA say it is a matter for councils to decide how this money is spent.

Many local authorities say they are battling huge budget deficits and reserves are being used in this way while they are advised to maintain a cushion of funds for emergencies.

One council source said: "It would be irresponsible for us to be running with no or very low reserves – it would leave us completely unable to respond in the event of an emergency and arguably very vulnerable to economic turmoil too.

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"To some extent it all gets spent the same way, so taking money from reserves means not having to cut a service or increase a price … but you can’t do it forever."

However, campaigners say society is facing an unprecedented crisis and it is vital that councils look at "every bit of their budget" as the pressure on households intensifies over the winter months.

The Herald asked every local authority how much unallocated revenue it holds and what cost-of-living support has been funded.

North Lanarkshire Council, which is run by the SNP, said its general fund reserve was just under £240m as of March 31 of which £169m is committed for resources including Covid-19 recovery, education, savings and change management. 

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Of the remainder, £8.631m has been spent to address the cost of living crisis including £450,000 funding for voluntary and community initiatives to provide additional drop-in spaces for residents. 

Perth & Kinross Council said it has approximately £16.6 million of "uncommited reserves". Last week it approved £470,000 for crisis support.

Conservative run Aberdeenshire Council said as of July 31, the value of its reserve was £74.249m with £9m unallocated.

The local authority said: "Our first efforts will always be to help those in financial difficulty by appropriate assistance, sign posting or direct help".

East Dunbartonshire Council said its 'Prudential Reserve' funded a £2.1million support package last month, including £0.6m from unallocated housing reserves. It will be used in part to fund additional £200 winter payments for each eligible child.

Highland Council, which is led by a oint administration of the SNP and the Highland Independent Group. said it was facing an overspend of £9.6m against the current year’s revenue budget.

It is allocating £3.223m from non-earmarked reserves to provide one-off cost of living support payments of £145 to each household in receipt of council tax reduction 

As of March 31 this year, Glasgow City Council's unallocated reserves were anticipated to be £31.5m.

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The council says its budget set in February provided a range of specific cost of living support funds, worth a collective £3m.

This included £9m from the Scottish Government to fund a £105 gift card for around 85,000 eligible households.

A spokesman added: "The events and shocks of recent years illustrate why it is essential that councils have a credible level of uncommitted reserves – and why Audit Scotland, rightly, requires us to hold reserves as a vital part of a sound approach to financial management.

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“At the same time, the council is straining to commit every pound it can to support communities, businesses and those facing the impact of the cost of living crisis. Councils do not have the option to run deficit budgets – but, should central government increase public spending, we are ready to ramp up that support wherever we can.”

Aberdeen city council has £12m uncommitted reserves and has agreed to spend on £1m on a package of crisis support.

East Renfrewshire said £5.2m of its reserves will be used to plug a £30million budget "black hole" over the next three years.

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South Ayrshire Council said it adheres to recommended practice and maintains a minimum uncommitted reserve balance of between 2% and 4% of revenue spend. 

A spokeswoman said crisis help included plans to set up warm banks in communties.

Audit Scotland said all councils reported additional reserves in 2021 because of late funding received to address the impact of Covid.

A spokeswoman added: "Councils must have clear plans for management of reserves."

Borders Council said it approved £1.4m to support communities and businesses out of £9.848m unallocated reserves. 

Moray said reserves would be used to plug a budget deficit and said a report will be heard at a future date about what support can be offered to residents.

Comhairle nan Eilean Siar (Western Isles Council, which is run by independents, said it had around £8million of un-allocated funds and said that even if all funds were used it would not cover the deficit after "enduring the harshest cut in our financial settlement of any local authority in Scotland".

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Sean Clerkin, of the Scottish Tenants Association (SFA) who obtained the March 2021 figures believes councils should be doing more.

He said: "The revelation that the 32 Scottish Local Authorities in Scotland have over £2.2 billion in general cash reserves of which £589 million is sitting unallocated in bank accounts accruing interest is sickening when so many people are experiencing real financial difficulties in the cost of living crisis when a difficult winter is approaching.

READ MORE: Cost-of-living crisis creates extreme concern for children

"This money should be used now by local authorities to give energy and food vouchers to local people, cash payments to low income families and and more financial support for food initiatives.

Falkirk said it had £12million in unallocated reserves but £1.158m of this was used to fund support.

East Ayrshire Council said it had committed more than £3million of help but did not provide any revenue figures while South Lanarkshire Council said it held a general fund reserve of £13.043 million "to cover unforeseen operational issues." The council has funded £3m of new support measures this year including  £250 hardship grants.

Edinburgh said it had funded more than £7m of cost-of-living supports but did not provide reserves figures.

Inverclyde said it estimated the reserves level by March 2023 will be just under £2.5m " well below the recommendation of £4million" and is negotiating a £15.2m  funding gap over the next three years.

Just  under £4m has been used to fund the council’s own one-off £350 cost of living payment which helped around 10,000 low income families.

John Dickie, Director of Child Poverty Action Group (CPAG) said: "Every level of government needs to look at their budgets with a view to maximising cash support for families this winter.

"There are examples of councils already topping up welfare funds, increasing discretionary housing payment budgets, increasing school clothing grants and finding other ways to provide additional cash support to families through the cost of living crisis."