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Mark Wallace: The rainy day for which councils have been saving is here

Mark_wallace Mark Wallace of the TaxPayers' Alliance suggests that if councils have been saving money for a rainy day, then now is the time to dip into it, in order to lighten the load for residents in these difficult economic times.

The nosedive taken by interest rates in recent months has thrown up a number of controversies. Whilst borrowers have been helped by falling mortgage and loan bills, savers have lost out. Naturally, most of the attention has been on individual savers – particularly those pensioners who rely on the income from their savings to pay the bills.

Today, though, the Local Government Association has pointed out that it is not just individuals affected by the loss of investment income, but local councils, too. Whilst I suspect the LGA has released this news as an argument for councils being given more “central funding” (i.e. taxpayers’ money), it does also suggest an alternative approach.

If the stockpiles of money that the councils have built up through surpluses in the past are currently failing to raise much, if any, interest languishing in a bank account, surely the shortfall should be made up by actually spending some of the cash? After all, one invests in order to make a return – if your money has stopped working for you, then there is little point in leaving it there. Worse, the Icelandic Banks fiasco shows that leaving it in some bank accounts can be actively risky in itself.

This isn’t just a philosophical point, it has already been put into practice, albeit on a small scale. It was reported last week that one parish council in Oxfordshire has already announced that it is not going to charge any money for its services this year, and will instead dip into its savings.

As Islip Parish Council’s chairman, John Sargent, said, “It would have been wrong to let our reserves sit there not accumulating very much interest.”

Now this is a small example – a matter of £10,000 being spent from savings rather than taken in tax – but it means over 300 families will have an average of £46 more in their pockets. That is a genuine help, and if one parish council can take direct financial action to help relieve the burden on people in this time of crisis, why can’t other, larger councils do the same?

It is not just existing cash savings that can be used to help people, of course. As Kensington and Chelsea has shown, savings in expenditure can be used to give people tax rebates, and Hammersmith and Fulham has a great track record of providing tax cuts.

Regardless of whether they are big, like K&C, or small, like Islip, councils have a great opportunity – and a moral responsibility – now to show that they care and help people out. If any council can make savings, or dip into the money they have been saving up for a rainy day, to lighten the load on their local residents, now is the time to do it.


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