Last week's full meeting of Salford Council saw the public resignation from the Labour Party of Councillor Paul Wilson, who listed the current spending cuts "whilst paying for expensive office blocks on the outskirts of Manchester, funding a failing stadium, paying millions of pounds in interest on capital projects that ordinary Salford people will not benefit from and all whilst hiking up Council Tax" (see here).
At the same meeting, the Conservative Party councillors also slated the Council for splashing out £72million on the Embankment office block near Manchester Cathedral, and for sitting on £85million of 'earmarked reserves', as well as £13.2million of general reserves.
"What are they earmarked for?" asked Councillor Karen Garrido "What is the figure for 2019? I don't know...I am absolutely astounded...really shocked that we're sitting on £85million...who knows about it?"
Last year's accounts show an 'earmarked reserves' figure of £85.5million, plus earmarked reserves for PFI schemes (Private Finance Initiative) of £11million, plus £13.2million as general reserves, plus other reserves, making a total £133.4million of 'usable reserves'.
Reserves are separate from the revenue account used to pay for front line services but there will be borrowing costs associated with them which are taken from the revenue account. The whole process is opaque to say the least...
In last year's accounts, there is an explanation of reserves held by the Council, which includes...
The investment fund... "to bridge the gap between investment in a savings project and the return on that project". No details are given.
The liabilities reserve... "to provide cover against a number of specific risks". No 'risks' are listed.
After last year's accounts were produced, the Salford Star asked to see all the financial statements for the One New Bailey office block under the 'right to inspect' rule for local councils. We were sent a table for which the financial position was incredibly difficult to decipher.
There was originally a £12.3million reserve for One New Bailey block, which made a £2.3million loss during 2017/18. That loss was taken out of the reserves, leaving £9.96million in 'reserve' for future losses.
Where did this original reserve of £12.3million come from? If the Council believed that One New Bailey could make such huge losses, why did it speculate with public money in the first place? Even when the rents from the building show a profit, will this ever reach the general coffers or will it be used to offset initial building and running costs and losses contained within the reserve?
The City Mayor explained at the Council meeting that New Bailey will be bringing in £7.5million profit "over 25 years".
In response to Councillor Garrido's criticism of the Council 'speculating' £72million on Embankment 101, Councillor David Jolley said that the block should provide a return...
"It should, in theory, cover the cost of borrowing" he explained, adding that "It's partly to do with regeneration", and noting that the Council's Scrutiny Board will be "looking into the business case".
Meanwhile, Councillor Derek Antrobus said that to suggest the Council was merely sitting on £85million showed "a lack of understanding...Earmarked reserves are there after advice from CIPFA [Chartered Institute of Public Finance and Accountancy] and Central Government on prudential use of our resources".
City Mayor, Paul Dennett, also hit back later in the meeting, explaining that the earmarked reserves were there for 'insurance claims, borrowing on the stadium, underwriting of leases'...
"Are we suggesting, similar to what the Socialist Party suggest, that we fritter away these earmarked reserves?" he asked "If we do that it is absolute madness because if anything changes in the environment in which we find ourselves – which we know in the context of Brexit is especially precarious – then the Council could go bankrupt if we don't make provisions...
"Let's enlighten ourselves on what the earmarked reserves are there for" he added "We'll look at these in detail..."
The question now is whether the earmarked reserves will be looked at "in detail" in public, or in Part 2 secrecy, where the public and press cannot ask questions or challenge anything...
For a background see previous Salford Star article: Salford Council £200million Magic Money Tree For Posh Offices - click here
Main photo shows Embankment being built
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