“People will rightly be shocked that Labour councils have billions stashed away when they hear stories of cuts to local services.”

Grant Shapps, quoted in Daily Telegraph, 17 April 2011

“In Liverpool, the council’s cash reserves are increasing to £121.7 million – enough to build four new secondary schools - while nurseries, libraries and leisure centres are stripped of funds. Labour-run Lambeth council, in south London, one of the poorest boroughs in the country, is expected to be closing libraries but has reserves of £93.7 million.”

Daily Telegraph, 17 April 2011

With campaigning on the AV referendum grabbing the headlines in recent weeks, readers could be forgiven for overlooking the local and regional ballots that will be taking place on the same day.

However certain councils did find themselves under the microscope for their financial arrangements in some of yesterday’s papers, with the Housing Minister singling out five Labour-controlled councils for 'hoarding' cash whilst making cuts to public services.

Some of the councils have hit back, questioning the sums quoted in the press. So can we bank on the figures Mr Shapps is using?

The story originates from Conservative Party research, and has previously been quoted in the House of Commons by Lib Dem Local Government Minister Andrew Stunnell.

We got in touch with the Conservatives to ask for a copy of the data being used, but unfortunately they haven’t yet provided us with one.

However some of the councils involved have pointed us towards an alternative set of numbers. For example, the London Borough of Lambeth argues that its own cash reserves total £28.7 million, significantly below the £93.7 million claimed by the Conservatives.

Lambeth’s figure is drawn from the amount deposited in its ‘general fund’ – which holds money that can be used in any part of the council’s operation – as declared in its 2009/10 Statement of Accounts.

Whilst this is an accurate figure, it is worth noting that the council also has £67 million in revenue reserves; cash set aside by the council for specific purposes ranging from schools maintenance to CCTV operation. Taken together with the General Fund reserves, it could be that up to £95.7 million is being held by Lambeth.

According to the Telegraph, Liverpool City Council’s deputy leader has also queried the figures, claiming that his administration holds £16 million in cash rather than the £121.7 million claimed by the Conservatives.

Again, the difference seems to lie in the definition of what constitutes a “cash” reserve. Liverpool’s figure of £16 million is once more the ‘general fund’ maintained by the council (which are actually closer to £15 million), which if added to ‘earmarked reserves’ of £116.1 million set aside for specific projects gives a total of £131.1 million, slightly above the Conservative figure.

(It is also worth that Liverpool also includes its pension liability in accounting for its reserves, meaning that the total reserves declared by the council actually has a negative value of some £450 million.)

Without access to the Conservative research, we can’t be sure how they have arrived at the numbers they propose. However going on the figures given in council statement of accounts, it seems the local authorities do have a point.

As both Lambeth and Liverpool council accounts make clear, local authorities are bound to comply with certain restrictions on the movement of cash between funds to ensure effective risk management.

It is therefore not necessarily the case that the services that the councils are being criticised for closing could be funded with the cash held in other ‘earmarked’ reserves. General fund reserves may therefore be the better yardstick by which to measure the extra funds available to councils.

We hope to update with further information if and when we receive a copy of the Conservative research.