Reserves

Council Reserves Explained

Town and parish councils hold two main types of financial reserves to ensure they can deliver services responsibly and respond to changing needs.

General Reserves (GR)

The Council’s main “rainy day fund.” They provide a cushion against unexpected events, such as emergency repairs, sudden loss of income, or unplanned expenditure, helping the Council maintain essential services without disruption.

Earmarked Reserves (EMR)

Funds set aside for specific purposes or projects – such as future building works, equipment replacement, or planned community initiatives.

Good practice

It is suggested that the level of General Reserves should typically be maintained at around 50–75% of the council’s annual expenditure, with the exact figure depending on the size of the council and the nature of its assets and services. Where a council has strong Earmarked Reserves, a level closer to 50% is often considered appropriate. The Council reviews the level of both General and Earmarked Reserves each year during the budget-setting process to ensure they remain adequate, proportionate, and aligned with current priorities.

By holding and reviewing both General and Earmarked reserves in this way, the Council demonstrates sound financial management, protects local services, and ensures that taxpayers’ money is used effectively for both today’s priorities and tomorrow’s plans.