Cash-strapped Perth and Kinross Council doubles reserve use to £28.1 million

Cash-strapped Perth and Kinross Council has significantly increased its use of reserves this year, now planning to use a total of £28.1 million – more than double the initially budgeted amount of £13.8 million. The decision to tap into reserves was made in February 2024, and during a recent meeting of the Audit and Performance Committee, Councillor Liz Barrett raised concerns about the council’s financial sustainability.

The council’s 2024/25 budget includes a substantial capital investment programme amounting to £674 million over the next five years. Key projects in this programme consist of the Cross Tay Link Road, a replacement building for Perth High School, and the new leisure facility PH2O. The PH2O project had been paused due to inflationary pressures, leading councillors to opt for a scaled-down facility at the Thimblerow Car Park site.

During the committee meeting, Councillor Barrett referenced Audit Scotland’s audit report which emphasised the finite nature of reserves, stating that once depleted, they cannot be replenished. The councillor pointed out that Perth and Kinross Council had slipped in financial sustainability rankings from fifth place in 2018/19 to 18th in 2022/23 among Scottish councils. Given the increased use of reserves this year, concerns were raised about the council potentially falling further down the rankings.

The council’s Chief Finance Officer, Scott Walker, clarified that comparing councils’ reserve levels could be challenging due to varying policies and circumstances. However, he affirmed that Perth and Kinross Council’s reserve strategy aimed to maintain reserves between two and four per cent. While the exact impact on the council’s position in the rankings remains uncertain, maintaining reserves within the specified range is a key focus.

In conclusion, the decision to significantly increase reserve usage reflects the financial challenges faced by Perth and Kinross Council. Despite concerns raised about potential repercussions on the council’s financial standing, officials maintain their commitment to prudent reserve management. As the council navigates its capital investment programme and addresses inflationary pressures, ensuring financial sustainability will remain a top priority.