At present councils hold £17bn of reserves – money set aside mainly to fund local, job-creating infrastructure projects, but also to meet unexpected costs such as redundancy payments.
Ministers including community secretary Eric Pickles have, however, put councils under heavy pressure to raid their reserves to offset the effect of 28% funding cuts from Whitehall, so they can maintain levels of local services. Pickles has said that when times are hard, councils must not turn their cash vaults into "Fort Knox".
Hitting back at such an approach as short-sighted and self-defeating, the LGA is now insisting that it would wipe out council reserves within five years and leave local authorities with nothing to spend on vital job-creating infrastructure schemes that are the means of pulling the economy round.
Cockell told the Observer that eating up reserves would destroy the capacity of local government to address local needs. He said: "Councils are working hard to shield frontline services from the 28% cut to the money they receive from government.
But cash reserves can only dampen the impact, not fill the gap. If councils plundered their reserves to cover the cuts, the cupboard would be bare within five years and there would be nothing left to invest in the growth-promoting projects Britain needs."
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