Council value soars by £80M – but virus brings ‘financial challenge’

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The value of Argyll and Bute Council rose by £80 million in the last financial year, a report has revealed.

The authority’s end-of-year accounts for 2019/20 have shown that the council’s value grew during the year to reach £326.371m.

Finance chief Kirsty Flanagan said in a report that it pointed to increases in the council’s ‘useable and unuseable’ reserves, as well as in its general fund balance.

Usable reserves are those which the council can use to fund investment in services or specific projects, or to reduce council tax levels.

Unusable reserves are those which it cannot, such as pension liabilities or gains in the value of assets.

However, Ms Flanagan warned that the COVID-19 pandemic will place ‘significant financial challenges’ on the council during 2020/21.

The accounts, which have yet to be audited, were approved by the authority’s business continuity committee at its meeting on Thursday, June 25.

Ms Flanagan said the net worth of the council increased to £326.371m at the end of March 2020, compared to £242.667m a year before.

The ‘revaluation’ of council assets played a part with the picture also improving because of a reduction in pension liabilities.

‘The balance of unuseable reserves has increased by £83.340m from £187.139m as at March 31, 2019 to £270.479m as at March 31, 2020.

‘Part of the movement is the increase in the pensions reserves which is linked to the decrease in the pensions liability with the remainder of the movement accounting adjustments required through the capital adjustment account and revaluation reserve.

‘The balance of usable reserves has increased by £0.364m from £55.528m as at March 31, 2019 to £55.892m as at March 31, 2020.

‘This is mainly as a result of a small increase in the general fund balance of £0.190m in addition to small increases to the capital fund and repairs and renewals fund.

‘The general fund balance at March 31, 2020 was £49.670m; this is an increase of £0.190m from last year. There are substantial sums earmarked within the general fund, amounting to £43.375m.

‘The council has agreed to hold a contingency balance equivalent to two per cent of the council budget for 2020/21 and this amounts to £4.929m. The remaining unallocated balance amounts to £1.366m.’

Ms Flanagan also said that the council was ‘faced with an unprecedented set of circumstances’ due to the coronavirus pandemic.

She added: ‘The financial outlook is significantly exacerbated by the extent to which COVID-19 will impact on both future years’ expenditure, including loss of income and the future years funding.

‘There is a lack of clarity at the current time over how the additional funds made available by the UK and Scottish Government to combat the impact of COVID-19 will meet the 2020/21 additional costs and loss of income, and whether there will be any further additional funding to support the medium to longer term implications of COVID-19.

‘The council are closely monitoring the financial impact to assess the effect it is having on the delivery of agreed savings options and the cost pressures it is creating.’