Merton Council is accused of building up cash reserves for a pre-election “war chest” at the expense of vital services.

Opposition councillors said the Labour-led authority was aiming to add £12m to its earmarked reserves this year, taking the total fund to £40m, at next week’s annual council budget meeting – where it is set to announce millions of pounds of cuts, many to front line services.

They said the level was excessive, there was no sign of how the cash will be spent and it may be being saved for a “war chest” to be spent immediately before the next local elections in 2014.

Debbie Shears, leader of the Conservative group, said: “Our problem is the transparency. What are they going to use these reserves for?”

But council leader Councillor Stephen Alambritis said: “The money in the earmarked reserves is being used to improve and expand our schools, to help out the local voluntary sector and to balance next year’s budget.

“If the Tories want to spend now and pay later that could mean harder and deeper cuts in the future, big council tax increases, or not having enough places at good local schools.”

But Coun Shears argued some cash from the reserves would be best spent preventing painful council cuts – including those to transport for vulnerable people.

The authority is on track to present a balanced budget to Wednesday’s meeting.

The Conservatives also claimed poor budgeting by the authority had created an underspend of £3.4m this year, money that could have reversed damaging cuts to free short-stay parking, town centre street cleaning and charities including Deen City Farm in Colliers Wood.

Councillor Henry Nelles, deputy leader of the Tory group, said: “You think what services could have been retained if they had budgeted properly.”

But Coun Alambritis said the underspend was the result of the atmosphere created by “the cuts agenda, which was driven by central Government”.

He said: “It’s not because of financial incompetence at all. When you get major recessions and pressures on spending, that’s what you get.”

The authority has claimed it needs to close a £70m budget gap over the next four years.