WITH reference to Cllr Waterhouse's letter concerning the borough council's budget, I feel a response may be helpful.

Forecasting interest rates correctly a year ahead is impossible. To presume high returns and spend them in anticipation is gambling with tax payers' money! Any extra interest will be used to 'match fund' Objective 2 grants for the economic prosperity of West Devon.

Cllr Waterhouse suggests that we borrow £400,000 of our reserves to reduce the council tax. This is not a loan but a permanent reduction in our painfully accumulated savings to a dangerous level too low to fund any unexpected calls such as legal fights. We lose interest income on that £400,000 for ever.

Savings can only be used once so next year we would have to raise council taxes by at least 27 per cent to recover. The loan from our savings of £400,000 could not be replaced unless we charged every average property £22.73 — another 26 per cent on top of the 27 per cent! This would not be a sensible way to run the finances of any organisation.

The 2.75 per cent increase in council tax last year, championed by Cllr Waterhouse, was enabled by removing the capital projects budget which has destroyed our ability to fund community projects and by using the collection fund surplus. Otherwise the council tax increase last year would have been 13 per cent!

We have managed to limit our budget increase to 3.5 per cent. Legislative changed need 2 per cent so we met all other inflationary costs from the remaining 1.5 per cent — a glorious achievement. The actual council tax increase of 8 per cent is due to central government's imposition of a scheme which penalises the borough council for excessive increases in parish and town councils' budgets. Something over which we have no control.

The council can be proud of the wisdom it displayed in setting a moderate budget with potential to provide more and better opportunities to our citizens.

Councillor Peter Hill

Chair of policy and

resources committee

West Devon Borough Council

l This correspondence is closed — Editor