Hampshire County Council’s balance sheet resources fell by more than £260m in the previous financial year following pension contributions payout.
According to the authority’s Annual Treasury Outturn Report, between March 2023 and 2024 Hampshire’s balance sheet resources reduced by £265m.
The “main driver” of the resource balance reduction was a payment of £264.9m representing three years’ worth of pension contributions, with other reasons being a decrease in reserves and an increase in the dedicated schools grant deficit (DSG), the report explained.
This comes as some in the Local Government Pension Scheme (LGPS) sector argued last year that with local authorities struggling to balance budgets, pension funds should be considering lowering contribution rates.
At the time, Steve Simkins, partner at consultant Isio, said: “On one hand you have got a council really struggling to balance its budget and using up all of its reserves. On the other hand, it has a share in a pension fund that has got way more than it needs and certainly more than it expected.
“So, the question I am asking is, is there a better way of working through this challenge? Could some of the pensions upside be used to support a council that is at rock bottom and having to cut services, which undermines value in the council.”
However, not everyone in the sector agreed with his proposals, with the LGPS Advisory Board emphasising the importance of stable employer contributions.
Falling reserves
Alongside Hampshire’s pension contributions payment, the council’s balance sheet resources fell during the last financial year due to a £11.7m decline in useable reserves.
“The county council reached a financial tipping point in 2022/23 with net draws from reserves required and this has continued as expected into 2023/24.
“Given the financial challenges being faced by the county council, and the local government sector more widely, usable reserves are expected to continue to fall,” the report said.
In December 2023, Hampshire warned that it was looking to establish a legal minimum service level as it was “exhausting all options for saving money”, following a £132m budget gap by April 2025.
Hampshire’s report also stated that the reduction in resources is also due to the increase in DSG deficit of around £38m, which is “expected to continue to grow significantly in future years”.
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