A COUNCIL is to take £2.5 million from its reserves to ensure it has enough cash to meet its day-to-day spending requirements. 

Finance chiefs at Monmouthshire County Council expect costs to increase by £2.6 million in the current financial year above what has been budgeted for, and have blamed inflation, rising interest rates, the “likelihood” of a UK recession and the greater demand on council services due those factors along with the rising cost-of-living. 

The decision will mean the council is holding £3 million in a fund to meet potential increased costs from now until the end of the financial year in March 2024, but fears have been raised the authority is “kicking the can down the road” by dipping into its rainy day reserves fund. 

The £2.5 million had been earmarked for meeting a shortfall in funding for the 2022/23 financial year, which wasn’t needed as the council’s budget position improved by March this year against a forecast overspend of £9 million in September 2022, and was identified in this year’s budget for meeting unexpected costs if necessary. The budget also demeanded £10 million in savings this year. 

Conservative Alistair Neale, who chairs the council’s performance scrutiny committee, said he was concerned the council was using reserves rather than making “transformative and efficient” changes. 

The Gobion Fawr ward member said: “We can’t keep kicking this can down the road. We can’t keep saying we’ll take from reserves we’ll potentially be in the situation we’ve extinguished the reserves but still need to make the changes all councils need to make. That is causing me a lot of concern.” 

Peter Davies, the council’s deputy chief executive and finance chief, responded by saying: “I don’t buy the ‘kicking the can down the road’.” 

He said using the £2.5 million is making use of “headway” the council had created in building up reserves since it received a VAT rebate in 2019/20 and extra funding during the Covid pandemic, which was put in place for the kind of unexpected cost increases it now faces. 

However the council also holds a further general reserve which Mr Davies said it is acknowledged is “low” and the council intends building up but said major changes to council services couldn’t be made instantly. 

He said the cabinet will consider a financial plan after the summer holidays, while the council’s senior leadership team is also taking action to address avoidable costs and identify any other possible sources of income. 

Among the areas where spending is set to be over budget are the council’s vehicle fleet, due to increased fuel and parts costs, expected pay rises, and homelessness. 

Monmouth Labour councillor Catherine Fookes asked why the council hasn’t been able to reduce the cost of bed and breakfast accommodation. 

Officer Francis O’Brien said: “We’re finding as soon as we help someone move out of a B&B to temporary accommodation more people come forward presenting as homeless, they can be people being evicted from private rented accommodation.” 

She said the council has moved some B&Bs to six month contracts to manage budgets but it still anticipates the numbers of people becoming homeless to increase. 

The budget monitoring report is due to be considered by the council’s Labour led cabinet when it meets on Wednesday, July 26.