ARGYLL and Bute Council’s cash reserve sits at almost 122M, but the local authority insists that the money cannot be used to mitigate any current budget gap.
As councillors prepare to meet later this month (February 25) to hammer out a budget and try to mitigate a 15 million budget gap, there has been renewed scrutiny over the council’s finances.
Currently, the council’s cash reserve is 121.7 million and, as councillors prepare to take difficult decisions at the end of the month, possible service cuts and council tax rises will be hard to square with such a substantial reserve figure.
However, policy lead for finance and depute leader of Argyll and Bute Council, Ross Moreland, stressed this week that the vast majority of the reserves are not freely available and cannot be used to simply plug gaps in day-to-day spending.
In 2022-2023, Audit Scotland identified the council’s cash reserve figure as 86.4 million, but that figure has increased significantly to just under 122 million. According to the council, the largest single factor behind this increase was a one-off accounting change linked to school Public Private Partnership (PPP) contracts.
In February 2023, councillors agreed to take advantage of new financial flexibility introduced by the Scottish Government, allowing the council to extend debt repayment periods to match the useful life of school assets.
This resulted in a retrospective accounting gain of 36 million, of which 35.7 million was placed into earmarked reserves for specific, council-approved purposes.
Crucially, this did not represent new cash flowing into the council, but rather a technical reclassification that improved the council’s balance sheet position on paper.
The council says the only reserve that can be used flexibly stood at 1 million at the end of March 2025. Taking account of current budget pressures and commitments, this is forecast to fall to just 300,000 by March 2026.
But what projects or commitments are earmarked for reserve monies?
Councillor Moreland explained: A wide range of initiatives and projects that cannot be delivered within the annual budget resources are funded through the use of reserves. These tend to be one-off in nature and may be delivered over a number of years. A significant element is committed to support capital investment, such as the Strategic Housing Fund, over 10 million, which can only be spent on housing; the Piers and Harbours fund, over 5 million, which can only be spent on piers and harbours; and funds to support Early Years and ASN learning.
He added: An element of the reserve balances is also from the Scottish Government or others and must be used for a specific purpose. A detailed analysis of earmarked reserve balances is reported throughout the year and is, and has always been, publicly available.
The biggest question for constituents and those directly affected by proposed cuts to services is why the council can’t use reserves to avoid cuts. The council maintains that reserves are already being used to help balance the books and that releasing earmarked reserves is among the options being considered as part of the 2026-27 budget process.
A January 2025 report by the Accounts Commission stated that while reserves can help support services in the short term, doing so is not sustainable unless they are used to drive service transformation and deliver future savings.
Council officials argue that Argyll and Bute remains in a stronger financial position than many local authorities, which has helped limit the scale of service cuts to date. They also reject claims that the council is sitting on a large rainy day fund.
Councillor Moreland explained: There have been a number of misleading or outright false stories regarding the reserves the council holds, from suggestions that it has a 60 million rainy day fund or that the reserves have doubled within a year. In a time of acute financial pressure for every council in Scotland, these stories are about as useful as the fantasy think pieces about dentist chairs that come with make-believe dentists or secret plans to stop nationally mandated pay rises.
Argyll and Bute Council is in a better financial position than most councils in Scotland, and that is why it has seen fewer service cuts than others, but it is not immune from the immense pressure councils are facing from historic underfunding and increasing service demand.
As the crunch budget meeting looms, the central question remains whether residents will accept further cuts while substantial sums remain tied up in restricted funds, and how clearly those trade-offs are explained when final decisions are made later this month.
