Stockport Council’s annual budget, like that of every local authority, includes many different parts. I’ve written about the biggest two from our point of view – the council’s day-to-day spending (revenue) and our one-off investments (capital) – in other articles.

Here I’m going to cover the other elements that go to make up the budget as a whole: our investments and borrowing, the money we get from social housing rents, money we pass onto schools and our reserves.

Investment and borrowing

Stockport Council has borrowed substantial amounts of money and plans to borrow more, mostly to fund our investment projects. The key issue is whether it can meet the repayments in a suitable way. The total outstanding borrowing the Council expects to have by the end of 2015/16 is £416 million. In addition, a further £111 million is funded from internal reserves. Adding those two together gives us the “Capital Financing Requirement” for the Council which is £527 million. That sounds like a lot – actually it is a lot! But it’s well within the limit of the amount the council can sensibly borrow without putting the finances at risk.

The Council borrows from other local authorities, from the money markets and from the Public Works and Loans Board (PWLB).

The Council also invests money in a mixture of long and short term investments. The investments must be low risk: this is public money and should not be gambled with. Those who remember the Icelandic banking crisis will recall what can go wrong! A team at the Council manages our investments. The Council currently has a little over £50 million available for investment and the overall return for the year to November 2014 was 0.63%.

This area is hugely complex and technical and I don’t claim any sort of expertise. If you want to find out more you can read the Council’s latest Treasury management report and 2015/16 Treasury management strategy and annual investment strategy.

Money from social housing rents

Most council money goes into one big pot – we get the money in and spend it on all the things the council does. One big exception is the Housing Revenue Account. Into this pot goes all the rents and services charges from social housing managed by Stockport Homes and out of it comes all the things that Stockport Homes does. That includes managing their housing stock – employing staff, paying for repairs and so on. It also includes investing in social housing across Stockport, so the fund built up in the Housing Revenue Account goes to build new houses as well as managing and maintaining existing ones.

Just like other areas of spending, we can borrow to fund that investment and for 2015/16 we are proposing to borrow £7 million.

Each year, councillors decide how much rents and service charges should be increased by. Too little and we won’t have the money to invest in our housing stock, too much and our residents bear high rental costs. For 2015/16 we are increasing the average social rent and most service charges by 2.2%

You can find more detail on the Housing Revenue Account here.

Money we pass onto schools

The Council has very little say in how schools are run these days – even Local Authority schools. We do have one key task, though. The Government gives us what’s called the Dedicated Schools Grant – £194 million – and, while every penny gets passed onto local schools, councillors decide how it’s divided between them. For example, how much more money should schools in poorer neighbourhoods get compared to our wealthier areas.

For 2015/16 the Council’s Executive decided that the gap in how much money each pupil got in rich and poor areas had got too large and should be narrowed. This has been a contentious change as some schools will gain and others will lose out as a result. However, there is a rule that says no school can see its funding reduced by more than 1.5% per pupil or 2% in total which protects schools from seeing big falls. For 2015/16 the highest funded school (Bridge Hall Primary) will receive £6,252 per pupil with the lowest funded schools (Pownall Green and Norbury Hall) each receiving £3,186 per pupil.  The average is £3,767 and a typical school in a poorer area gets a thousand pounds more per pupil than a typical school in a wealthier area.

Although the Dedicated Schools Grant is the biggest chunk of money there are other funds going to schools such as the Lib Dem Pupil Premium (which is targetted at poorer pupils and is not included in the figures above), Educational Services Grant and Music Grant.

See here for more information on schools funding.

Council reserves

Like most households and businesses, councils try to have some money put aside for a rainy day and to save for costs we know are coming up. At home we try to have enough saved up to carry us through bad times – at least for a little while – and we put money aside for bigger expenses we know are coming up, saving for that holiday or a new car.

The money Stockport Council puts aside for a rainy day is called “general reserves” and is currently £11.2 million. That might sound like a lot, but it’s barely enough to keep the council running for a fortnight – few businesses of that size would be comfortable with so little put aside. We don’t want to store away more than we need and we think this is about the minimum if we’re being prudent. The money saved up for specific projects – one-off costs we know are around the corner – are called “earmarked reserves”. This is a much bigger number – £45.5 million, and the council regularly reviews it. As councillors we want to check that these reserves are still needed and that the money allocated to each project is right. Each year some of those reserves are spent, and as new costs are identified for the future, new money is put aside.

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