Merton Council has more than £100m stashed in reserve funds, after banking more than £20m against a backdrop of cuts during the last financial year.

Figures published as part of an external audit of the council show Merton added £20.9 million to their usable reserve pot last year, taking the total to a huge £107.629m.

This is despite announcing a programme of cuts to reduce the annual spending budget by £11m over three years in March.

A report set to be discussed at a General Purposes meeting on Friday states £49.627m is labelled earmarked for a specific purposes, leaving a £58m unreserved pot.

Mark Allison, cabinet member for finance, disputed the figures arguing £19m is unallocated, and the rest will be assigned to various budgets.

He said: "The vast majority of this money is not just lying around, but is needed for important projects.

"Around £27m is set aside for capital work, and £12m for our ever-improving schools, while £50m is allocated for other purposes.

"All Councils are required to have unallocated money for a rainy day, and the latest data we have suggests nearly two thirds of London Councils had between £13m and £31m while we have £19m.

"Our sensible, disciplined approach to finance has helped us protect priority services and budget £1m more each year to 2015/16 for older people’s services, while ensuring we are the only Council in South London to freeze Council Tax for three consecutive years and maintain rebates for people on low incomes."

According to a report by the Audit Commission in December 2012, at the end of March 2012 English councils held reserves totalling £12.9bn.

Councillor Suzanne Grocott, Conservative shadow cabinet member for finance, said: "Labour just can’t be trusted with the council’s finances.

"With a whopping £107million of reserves in the town hall coffers, they persist in building up their war chest for next year’s local elections whilst also making drastic cuts to services that residents value.

"In the last year alone Labour have stashed away another £20 million of taxpayers’ money in the bank yet still they refuse to cut council tax or make the necessary investments which could deliver real service improvements. They also under spent their own budget last year, which means the borough’s hard pressed residents are consistently paying more for services than they actually cost to deliver."

There is no law governing the level of reserves authorities must hold, however guidance from the Audit Commission, a body set up to protect the public purse, states that: "Elected members are responsible for ensuring that their council’s reserves are appropriate for local circumstances, and are accountable to taxpayers for the decisions they make."

Local authorities have faced a 26 per cent reduction in government funding from 2010/11 to 2014/15 testing their financial strategies.

Cuts approved by Merton Council in this year's budget included a £4,000 reduction in funding for the Polka Theatre and a £20,000 cost cutting plan to make day centre staff responsible for collecting and taking users home.

Funding for six voluntary groups for the elderly was removed as part of the Ageing Well initiative which simultaneously saw funding for the Wimbledon Guild doubled.

Seven jobs will be lost in the children and youth services as part of a plan to integrate families, youth offending and education departments saving £420,000 over four years while the borough’s street lighting budget will be cut by £50,000.