Council chiefs have rejected accusations that a £2m budget giveaway has jeopardised the borough’s financial stability.
The council has announced the capital funding for eight borough townships – at the same time as unveiling budget cuts of more than £2.6m.
The cash has come out of a £4.9m transitional fund from the Government over two years to help areas worst hit by cuts.
But Hyndburn’s Independent group believes that money should be used to cut the council’s £12m debt, with annual debt interest payments currently in the region of £500,000. They accused the Conservative council of "plundering the reserves" shortly before May’s crucial local elections.
Local authorities are currently facing rising commodity prices, upward pressure on interest rates and uncertainty from a reorganisation of government funding from 2013/14.
The council’s reserves stood at £4.2m at end 2009/10, but were trimmed to £2.3m following investments approved by the Cabinet last June.
At the full council meeting earlier this month Coun David Mason claimed the council should pare down its debt.
"Putting politics before economics is always a recipe for disaster," he said. "The consequences will lead to our electorate facing year-on-year increases in council tax."
But Coun leader Peter Britcliffe replied: "We have had the reserves in such a healthy position that we have been advised that it would be prudent to use them.
"What are reserves for, if not for a rainy day?"
The Medium Term Financial Strategy (MTFS), prepared by the council’s executive director for resources, makes for bleak reading.
It predicts the ratio of central government funding to council tax revenue will have moved from roughly two to one, to ‘almost parity’.
By 2014/15 the MTFS forecasts the government grant will be just £5.6m, compared to the £9.1m for this year – a whopping 38.5 per cent cut.
The report states: "It is recommended that reserves are maintained at a minimum of £2m or strengthened at this time to meet any major challenges which might occur over the next three years."
The council is predicting an underspend in 2010/11 of more than £880,000, but this has been committed.
Coun Britcliffe told the Observer: "The council made a decision at its December meeting to use any underspend that occurs in the 2010/11 financial year to meet the cost of redundancies and to support any projects that need upfront financing to deliver long term savings.
"The council’s reserves are healthy and have been restored by good financial management since 2003/04. In normal times they would be viewed as strong – however given the reductions in government funding and other pressures and risks that we face, £2m is the prudent minimum we should hold.
"The council has chosen in recent years to fund a number of projects from reserves, while maintaining them at prudent levels. These are all necessary pressures on the council and it has chosen to ensure it has the money first before spending on these worthwhile projects."