Two treasury society presidents have expressed disappointment that the government has opted for a two-year extension to the IFRS 9 statutory override rather than implementing a permanent extension.
The Department for Levelling Up, Housing and Communities (DLUHC) has confirmed the two-year extension – as recommended by CIPFA and the ICAEW – but has yet to say whether it will also take up the institutes’ suggestion that the standard be applied fully after 31 March 2025.
Full adoption of the standard from 2025 would not be welcomed by both county and district treasurers, according to the presidents of their societies.
Given 2025 is likely to be a year of significant disruption in the way councils are funded and by how much, it is disappointing a further five years or permanent override could not be agreed.
Market uncertainty
Michael Hudson, president of the Society of County Treasurers, told Room151. “The further two years is welcomed, but this just kicks a can down the road, albeit at a time of market uncertainty. But the risk of changes in valuations from pooled investments leading to service cuts remains.”
Hudson is currently chief finance officer at Worcestershire County Council but has been appointed as executive director of finance and resources at Cambridgeshire County Council. He will take up this post in March.
“Given 2025 is likely to be a year of significant disruption in the way councils are funded and by how much, it is disappointing a further five years or permanent override could not be agreed,” he said.
Alison Scott, president of the Society of District Council Treasurers and shared director of finance at Three Rivers District and Watford Borough councils, echoed Hudson’s view.
“We remain concerned about what happens at the end of the extension period given short-term market volatility, and would urge an early decision from government in order to allow authorities to plan,” she told Room151.
Long-term clarity missing
The current five-year statutory override to IFRS 9 expires on 31 March 2023, and will be immediately followed by the two-year override. DLUHC’s longer-term approach may become clearer when the department publishes its formal consultation response, which is expected in February this year.
David Green, strategic director at treasury advisers Arlingclose, said that he welcomed news of the extension. “With the financial markets still recovering from the turmoil of 2022, this was not the right time to end the override,” he said.
“But never-ending short-term extensions don’t help local authorities with their long-term planning. So I’m hoping for some clarity on the position after 2025 when DLUHC publishes its formal consultation response.”
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