Wonga words worry Wirral
0A debate stirred up over inter-authority lending in Wirral has highlighted the need for financial training of councillors.
Conservative councillor Leah Fraser published a blog criticising the Labour-held Merseyside council for using reserves to make loans to other councils. Listing both Wirral’s counterparties and the interest rates on their loans Cllr Fraser dubbed the authority “Wonga Wirral”.
On Twitter several other councillors from the same party responded to the story with critical Tweets and the Wirral Globe published an online opinion poll asking the public whether they thought the council should lend its “council tax payments” to other authorities. The overwhelming majority of respondents said that it was not acceptable.
Cllr Fraser’s blog read: “It seems Wirral’s ‘Wonga’ Council is happy to bring in a bin tax for residents while lending the cash to councils elsewhere. If Wirral Council is so awash with money, why don’t they invest it a bit closer to home, to benefit the people who live here?”
Joe Blott, Strategic Director for Transformation and Resources at Wirral said that the council’s treasury management investment strategy identifies approved financial institutions, as well as other local authorities, who the council negotiates agreements with for the benefit of residents. “Lending to other local authorities is a low-risk way to raise income to support our services,” he said. “Local authorities have a responsibility to manage their finances to optimise performances. This doesn’t just mean sitting on suitably sized reserves, it means making prudent investments.”
Newcastle borrowed £6m from Wirral and its director of resources, Paul Woods, spoke on local radio to try and explain the matter to the public. “At the moment we have borrowed from Wirral and one or two other councils,” he said. “We can get much cheaper interest rates. With the Wirral loan we are borrowing at 0.6% which is significantly cheaper than the cost of borrowing we would get somewhere else.”
Northumberland’s director of finance, Steven Mason, also commented that his council routinely borrows from others: “This represents value for money in comparison to borrowing from other sources,” he said. The Leader of Wirral council pointed out in local press that the council had in fact made over £600,000 from the interest paid on its loans to other authorities.
Steve Bishop, strategic director for South Oxfordshire and Vale of White Horse told Room 151 that education for both the public and members is required. “As a general point about the education of councillors and members this story illustrates how important it is for all members, not just cabinet members,” he said.
“If this councillor purports to be interested in finances it illustrates the need that any judgments about investment or borrowing be made in the context of having read that council’s treasury management strategy and policy*. The chances are that the strategies and policies that have been approved by councillors will give the council the remit and might even direct officers to spread risk across a range of portfolio instruments and might mention the need to invest in other councils out there. So part of the education for councillors has got to be to read what your council sets out to do, because if it wants to lend to other councils you’ll just look stupid criticising it because you’re criticising something that you and other councillors have already approved in the past. Ms Fraser should be reminded that she needs to revisit the councils treasury policy and then decide whether she thinks it’s a daft idea.”
* Wirral’s Treasury Management Strategy lists ‘Term deposits with other UK local authorities’ in its approved specified and non-specified investments. P.50 & 51
