Spelthorne's budget for 2009/10 is under great pressure largely due to falling interest rates, but this is only part of the story. Many years of financial incompetence by the ruling Tory administration has led to a reliance on asset sales and high interest rate income - both of which have been hit by the economic recession.
The failure to sell Bridge Street car park has left a hole in the planned capital receipts of more than £10m and this was expected to yield about £600k per annum. At the same time the fall in interest rates will erode income on the Council's dwindling reserves.
The twin policies of assets sales and the reliance on the interest on the money raised has been shown to be a big mistake. Liberal Democrat Councillors warned the Conservatives about this but were completed ignored.
There is a gap between the Council's income - from Council Tax and central Government grant - and what it spends. This gap is expected to be at least £2m which will be filled by reserves. The Council's budget shows the following figures:
Interest on Reserves £1,020,000
Transfers from Earmarked Reserves £873,653
Transfers from Reserves £ 175,000
Over and above this the Council expects to charge £135k to "capital salaries" - this is a portion of staff costs that are charged to capital (reserves).
It is certain that interest receipts will fall over the next year as fixed term investments mature and have to be reinvested at lower rates. It is unlikely that Bridge Street car park or any other significant asset will be sold for anywhere near the pre-crunch levels for years to come. So this problem is going to persist and potentially get worse for some time to come.
See the link below for details of how reserves have been eroded in recent years.