Ahead of next week’s budget meeting, figures reveal that Tower Hamlets Council has reserves of £95.3million.
The figures, revealed in Wednesday’s Evening Standard show that Tower Hamlets has the fifth largest amount of council reserves out of London’s 32 boroughs. In total, councils across the capital are sitting on £1.6 billion of reserves.
Although councils are obliged by law to keep money in reserve in case of emergencies, Local Government Secretary Eric Pickles thinks they only need to hold back 2.5% of their budgets.
Tower Hamlets’ £95.3 million of reserves accounts for 28.2 per cent of its budget, compared to Brent Council which has the smallest reserves in London, reserving 4.4 per cent of its budget.
In December, Pickles announced cuts to central funding for local councils, with councils facing average grants cuts of 4.4%. However, Tower Hamlets, along with Hackney, are among the 36 local authorities that will take a maximum cut of 8.9%.
East London Lines understands that Mayor Luftur Rahman has accepted Lib Dem proposals to dip into its reserves for £1 million for apprenticeships and graduate initiatives over three years.
When asked if the council would be tapping into more of its reserves, a spokesperson for Tower Hamlets Council said: “The budget was not approved at last Wednesday’s (February 23) full council meeting, so we are unable to confirm how much of the council’s reserves will be used at this stage”.
In the first budget meeting on February 23, councillors discussed a package of £56 million cuts for the next three years amidst a hostile atmosphere which resulted in the police being called in, and members of the public being ejected. The public gallery was cleared out before the vital vote.
The budget meeting will now take place on March 8.
In a statement on the Tower Hamlets Council website, Mayor Rahman said: “Given the financial challenges presented by government cuts Tower Hamlets has been forced to identify £72 million of savings over three years with £30million being cut in 2011-12. I have a moral duty to ensure these difficult choices are made in the best interests of residents.”
He added: “My first budget is aimed at safeguarding frontline services while maintaining vital support for key services across the borough – which despite recent economic growth and social improvement, remains one of the poorest in the country. My priority is to protect vulnerable people and ensure that youth services, community safety, children centres, housing investment, schools and homecare in particular are protected.”
At a public meeting on February 2, he pledged that no frontline cuts would be made to children’s centres.
Commenting on whether councils should tap into reserves, local government minister Andrew Stunell said: “Good financial planning is about putting a little extra away when the sun is shining so you have some cover during the rainy days. London councils have put away £1.6 billion of taxpayers’ money in their town hall coffers for just such an occasion – the time has come to put it to use.
“All good councils in the capital should be considering the merits of temporarily dipping into this money as part of their budget planning to help protect frontline services, with a view to building up their reserves again in the sunnier days to come,” he said.
However, a spokesman for London Councils said: “Our local authorities have prudently built up reserves to prepare for emergencies, and to suggest that they wipe out these reserves to mitigate reductions to their funding is misguided and potentially hugely damaging.”
The Evening Standard’s findings also found that Hackney had reserves of £70.2 million, 21.2 per cent of its budget and Lewisham had £58.9 million in reserves, 18.8 per cent of its spending power. Croydon had the lowest amount of reserves out of the East London Line boroughs, with £35million in reserve, 11.2 per cent of its spending power.
Additional reporting by Nalini Sivathasan