As an eventful year for local authority treasurers draws to a close, Room 151 takes a look at the top 10 stories from the sector during 2019.
10. Spending watchdog probes council borrowing for property investment
May
Speaking before a committee of MPs, outgoing National Audit Office comptroller and auditor general Sir Amyas Morse reveals that his body will conduct an investigation into councils using Public Works Loan Borrowing to fund property investment. Morse said the report would focus on “how rigorously the [Ministry of Housing, Communities and Local Government] is supervising this”.The report was due to be released towards of the end of this year, but has yet to appear.
9. Warrington outlines robust defence of out-of-borough investments
February
Warrington Borough Council’s capital strategy for 2019/20 is released, with an explanation of why it intends to depart from government investment guidance and continuing to borrow to invest in revenue-generating property outside its boundaries. The strategy says: “In certain instances, notably in giving loans to London housing associations and purchasing assets outside its area for investment purposes, the council have decided not to have full regard to the guidance or the prudential code in these instances.” Speaking to Room151, Lynton Green deputy chief executive and director of corporate services at Warrington, added that the council is committed to its approach of only applying minimum revenue provision on any reduction in value booked during yearly valuations – rather than the whole amount of spending funded by borrowing.
8. Councils slam ‘misleading’ BBC reserves danger list
June
A number of councils react with indignation after being named by the BBC as at risk of running out of reserves. The BBC published the list, which it claimed showed councils at risk in the Chartered Institute of Public Finance and Accountancy’s resilience index. Describing the BBC report as “spurious”, Rob Gledhill, leader of Thurrock Council, one of the named councils, said: “This report appears to be based on incorrect assumptions and faulty maths.”
7. Redbridge taps market for £75m with RPI-linked muni bond
November
The London Borough of Redbridge launches a £75m bond, just weeks after the Public Works Loan Board increases its borrowing rate. The council’s adviser Traderisks says the bond is the first RPI-linked bond issued by a local authority and comes with an effective interest rate of 1.87%. The rate assumes RPI of 2.5%. Antoine Pesenti, senior managing director at Traderisks, says: “Our funding solution has allowed Redbridge to secure debt which is RPI-linked and which has a deferred structure, both features which are not available from the PWLB, and at a price significantly cheaper than PWLB,” Pesenti said.
6. LGPS ‘may need interim valuation’ to deal with Supreme Court fallout
July
Uncertainty in the wake of a Supreme Court ruling on discrimination related to public-service pension reform may require the Local Government Pension Scheme (LGPS) to conduct an interim valuation, bosses say. The previous month, the Supreme Court had upheld an Appeal Court ruling that public sector pension arrangements were discriminatory against younger staff. Speaking in November, Jeff Houston, secretary of the LGPS Advisory Board says he expects the shape of the remedy resulting from the case to be clear by the second quarter of 2020.
5. Auditors and PSAA slammed after jump in accounts deadline failures
August
Figures from Public Sector Audit Appointments (PSAA), the body responsible for appointing auditors, reveal that 210 out of 486 (40%) of audit opinions on local government bodies for 2018/19 were not delivered on time. The figure has jumped sharply from last year, when only 13% of opinions missed the deadline. While some in the sector blamed auditors, Tony Crawley, PSAA’s chief executive, said: “The challenge for all of the parties engaged in the accounts and audit process is to address the need for improvement urgently.”
4. Thanet urged to clarify s151 officer suspension
September
Opposition councillors, union leaders and local campaigners express surprise after the suspension of Thanet District Council’s section 151 officer Tim Willis. However, he is reinstated in October after members of the general purposes committee unanimously clear the deputy chief executive of seven gross misconduct allegations.
3. Spelthorne halts commercial property investment
February
Spelthorne Borough Council calls time on its controversial programme of borrowing from the Public Works Loan Board (PWLB) to fund commercial property investment. The activities of the council sparked national attention after it borrowed £1bn to fund its revenue-raising purchases. The council’s capital strategy document says: “The focus of the council was previously to generate revenue in order to safeguard its basic services. The focus now is on providing affordable housing.” Later in the year, Room 151 reveals that the council’s income from property investments will overtake council tax receipts next year.
2. LGPS faces cost uncertainty after Supreme Court upholds McCloud ruling
July
Councils are left facing compensation payouts after the Supreme Court rules that 2015 changes to the public sector pensions had discriminated against younger employees. Judges rule in favour of the Fire Brigades Union (FBU) and a group of judges led by Victoria McCloud, challenging the rule changes, which protected the pension benefits of older workers. Earlier in the year, Room151 reported comments by Michael Scanlon, deputy chief actuary in the Government Actuary’s Department, that LGPS funds are likely to face an increase in their liabilities of up to 1% if the government lost the case.
1. PWLB rate hike sends shockwaves through council finance sector
October
With more than twice as many views on Room 151 as the second top story of 2019, the Treasury’s shock decision to raise the Public Works Board Loan rate is the highest viewed of any Room 151 article in the site’s history. The first outlet to break the shock news, and reported predictions that housing and regeneration schemes could be made unviable. David Green, client director at treasury adviser Arlingclose, said: “This effectively prices the PWLB out of the local authority loan market. There are plenty of other lenders out there, including banks, pension funds and other local authorities, willing to lend at cheaper rates.”
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