PUT MORE CASH ASIDE OR COUNCIL COULD GO BANKRUPT

Finance chief warns against dipping into ‘already-too-low’ reserves to soften tax blow

ANGLESEY council could end up bankrupt if it doesn’t put aside more cash, its finance chief has warned.

Marc Jones said if the council didn’t put more cash into its reserves, the authority could go the same way as Northamptonshire, which was unable to balance its books and became effectively insolvent last year.

Finance officer Mr Jones warned councillors that the amount in the authority’s reserves was already too low.

He said: “The balances are already at a level below what I would be comfortable with, so to reduce it even further to allow a lesser council tax rise would raise the risk even further if something went wrong.

“If we persist to overspend and the reserves aren’t there, the authority technically becomes insolvent, which has already happened in Northamptonshire, of course.”

Following another 0.3% drop in the Welsh Government settlement – which makes up three quarters of the authority’s income – decision-makers had identified substantial cuts to make up a £7m shortfall, including a substantial cut to the island’s education budget.

A proposal for a 9.5% increase in the council tax is also on the cards.

The challenges were described as “a perfect storm” due to other outside factors – including a rise in the fire service levy, inflation, the national living wage and pension costs.

Officers have been keen to stress that Anglesey would still have the second lowest council tax rate in North Wales.

But compounding the authority’s financial woes, a separate report was also presented, warning that steps will need to be taken to replenish the cash reserves which, according to external auditors, are set to drop to levels recognised as a “threat” to the council.

A recent letter from the Auditor General for Wales noted that projections suggest the balance could end up being as low as £3.6m from April, despite having stood at £8.9m just three years ago.

However, the auditor acknowledged that this was mainly down to “demand-led” services, such as children and adult services, which has resulted in the authority having to dip into its reserves to fund the projected overspend of £1.59m by the end of the current financial year. The report also noted several years of cuts in the annual block grants from Cardiff Bay as a key reason.

“This recent trend of reduction in the general fund balance is unsustainable and increases the need for the council to deliver recurring savings,” commented the auditor.

“This is recognised as a risk by the S151 Officer and the council and there is an acceptance that over the longer term the budgets need to provide for the replenishing of the reserves.”

Among the measures already taken by the authority to limit the overspend are delaying recruitment for some vacant posts, and limiting staff overtime.

Deputy leader Ieuan Williams urged the public to lobby their Assembly Members to get more funding for local government.

The 2019/20 budget will officially be set when the full council meets in Llangefni next Wednesday.