Warnings over council's reserves amid shortfall

The council is facing a £13m shortfall

A director of finance at a council has warned about the authority's reserves, as it faces using them to fund a shortfall on its budget this year.

Cheshire East Council said it was facing a £13m overspend and had previously raised concerns about the impact of the cancellation of HS2 on its budget.

In a report from director of finance Alex Thompson, he said he was "not satisfied" the council's reserves strategy had an "adequate level of reserves" to support its budget.

The council is set to discuss its finances at a meeting later.

Cheshire East has introduced a number of cost saving measures in recent months, including cuts to library hours

Cheshire East Council currently has general reserves of £14.1m and if it was unable to reduce its shortfall by the end of the financial year, it would need to cover it from the council's reserves.

Meanwhile, its budget for the next financial year is also forecasting an overspend of £11.7m.

It would move funds from its earmarked reserves - which were set aside for specific or predicted spending - to cover this.

A total of £8.7m of spending in preparation for the now-cancelled HS2 line to come to Crewe was also set to come from the earmarked reserves.

By the end of this financial year, the council would have reserves of £25.3m but with the spending from next year's budget, the authority would be left with total reserves of £3.8m.

Mr Thompson's report said this would 1% be of its expenditure.

"This position is clearly unsustainable as a 1% variance in spending could trigger the requirement for a s.114 report," the report said.

It also said the council "must address the current trend of overspending".

The report added the council had been in regular contact with the Exceptional Finance Support team of the Department for Levelling Up, Housing and Communities as well as the Department for Education over SEND spending and the Department for Transport over HS2.

It said any decision on exceptional financial support was likely to be after the council had agreed its 2024/25 budget but the government had "provided assurance" that it would continue to work with council officers "to find a way forward".

The council is set to discuss the report at its corporate policy committee meeting later.