I was pleased to attend the Room 151 Local Authority Treasurers and Investment Forum and Finance Directors Summit at the London Stock Exchange on 14 September, my first attendance even though this was the 9th year of this annual event.
There was an excellent line up of high profile and expert speakers with a topical and timely programme, especially given the significant recent media coverage of the increasing commercial investment approaches being undertaken by many local authorities.
It was a real coup for Room 151 to secure Melanie Dawes, permanent secretary at DCLG, to give a rare but welcome central government perspective.
And it was great to have the opportunity to hear directly from a range of expert local practitioners involved in some of the more high profile, innovative examples and case studies including from Spelthorne, Warrington and Thurrock councils.
An impressive array of more than 90 delegates provided some thought provoking and constructive challenge in discussions on the drivers for these commercial approaches and the local governance arrangements used in order to consider and adopt these investments.
The summit was also timely as the CIPFA Prudential Code is under review and currently subject to consultation. And personally somewhat reassuring that my contribution to the event as CIPFA President (about what I hoped to see in the Code) was — without rehearsal — consistent with emerging thinking from CIPFA chief executive Rob Whiteman on how the code could be strengthened in order to keep it in place with the support of HM Treasury and DCLG.
My own personal reflections and “takeaways” from summit were as follows:
It was encouraging that Melanie Dawes recognised the contributions of Section 151 Officers (as the agents who enable her to fulfil her parliamentary accounting officer responsibilities) and of the importance of keeping the Prudential Code — an excellent example of effective self-regulation and a mechanism that helps to deliver the governments agenda.
There are three key drivers for councils that are making commercial investments:
- Increasing self-sufficiency: From the end of government grants and the move towards increasing local control over business rates and council tax.
- Dealing with austerity and cost pressures: Where service cuts are causing local pain with the costs/risks of doing nothing are balanced with the risks of being more commercial.
- The desire for enhanced local leadership of places: To shape communities through economic regeneration and resident wellbeing.
In all of the case studies it was striking that real in-depth local knowledge and insight had been crucial in making the investment decisions that have attracted attention and, not surprisingly, things are usually not as simple as they may first appear.
The zeitgeist tells us that it often easier to sell a simple lie than a complex truth.
That said we, as sector, do need to get better at explaining “why” not just “what” we are doing with these more commercial investments. That means we need to demonstrate more openness and transparency, and welcome scrutiny as part of good governance and local democratic accountability.
We should be able to do so with confidence, based on principles not rules.
It will be easier for publicly funded local democratic organisations to explain and justify our decisions if these investments have:
- Community, social and regeneration benefits, not just financial returns.
- Are within an local authority’s own geographical area rather than outside it.
- Been subject to independent and expert advice and open and transparent scrutiny.
- And the level of any debt taken on and aggregate risk is proportionate to the size of the organisations balance sheet.
Andrew Burns is CIPFA president and director of finance and resources, Staffordshire County Council.