Council clarifies financial position during pandemic

Following Bridgend County Borough Council’s recent announcement on the anticipated £9m cost of meeting the challenges of the Covid-19 pandemic, the authority has responded to additional enquiries about its finances.

Deputy Leader, Cllr Hywel Williams, said: “As the pandemic has resulted in an estimated £4m loss of income and unexpected costs of £5m, a number of questions have been asked about how the council is meeting this challenge.

“One issue that we are regularly asked about but which is especially pertinent now is why we cannot simply dip into our reserves to cover these costs. But ‘reserves’ is a bit of a catch-all term, and while some may assume it to mean money that has been put aside for a rainy day, it actually means money that has been marked for specific purposes as well as emergency situations.

“Only a small part of our reserves incorporates a contingency fund which we can use in times of extreme emergency, and this is maintained in line with financial best practice – for example, in case the council needs to pay suppliers during a national crisis to ensure that services can continue.

“The Covid-19 coronavirus perfectly illustrates why this contingency fund is necessary, and while we may well need to draw on it as the situation develops further, the position is also constantly evolving in response to announcements from Welsh and central Government.

“Another issue that has been raised recently is how money can be invested in other local authorities who may use it in initiatives that are designed to generate revenue. Because of the way in which local government cash-flow operates, money which has been reserved for a specific purpose can also be invested until such time as it is needed.

“Where this takes place, it is common for councils to invest in other authorities as unlike private investments, councils have a record of not going bankrupt, the money is always paid back, and the income generated from the interest earned on the investment helps to reduce the cost of all of our services, including council tax levels.

“The vast majority of UK councils carry out such low-risk investments in order to extract as much value as possible for the benefit of residents. Trying to divert the money into another area would effectively be attempting to spend it twice, which of course is not possible.

“In the case of Bridgend, such work is reported on as part of our annual Treasury Management Strategy, which is agreed by all councillors at full Council as well as being scrutinised by the Audit Committee. We are also subject to independent inspections from Audit Wales, the statutory external auditing body.

“As we publish full details of how the council spends money and sets budgets at the council website, I would strongly advise anyone who would like to learn more or who wants to establish the full facts to take a look.”