News round-up: Liverpool’s tax referendum, council borrowing freedom, Brexit sustains MMFs, Scottish PWLB proposal
0Liverpool set for first council tax referendum
Liverpool City Council could become the first local authority to hold a referendum on a council tax rise above the government’s 3.99% threshold. Liverpool mayor Joe Anderson is proposing an increase of up to 10% due to the what he called the council’s “desperate situation”. If the proposal is agreed, the rise would be effective from 2018.
CIPFA calls for Autumn Statement action on borrowing
Councils should be given greater freedoms on borrowing for investment, according to the Chartered Institute of Public Finance and Accountancy. In a submission to Treasury ahead of next week’s Spending Review, it said: “Local government has proved able to manage its borrowing within the prudential framework. To impose additional restrictions and barriers imposes unnecessary burdens on the sector and limits creativity and growth by stifling investment funding.”
Council revenue expenditure falls
Revenue expenditure by English local authorities totalled £94.5bn in 2015/16, down 1.5% from £95.9bn in 2014-15. New figures released by the Department for Communities and Local Government show that 26.2% of revenue expenditure will be funded through council tax with 12.5% from business rates retention, 60.4% from central government grant and 0.4% from reserves.
Treasury set to take PWLB powers
Powers currently held by the Public Works Loans Board look set to pass to the Treasury once the lender is abolished. A consultation on the move elicited 22 responses supporting the move, while a single response said there could be advantages to the Department for Communities and Local Government taking control. In its response to the consultation, the government said giving PWLB powers to the Treasury would “provide a more streamlined, up to date governance arrangement and ensure that ministers and accounting officers are properly accountable to parliament, thus replacing the current lines of accountability which are outdated and not fit for purpose.”
Brexit fears sustain money market fund interest
Uncertainty over the UK’s departure from the European Union combined with a lack of alternatives have kept investors in money market funds despite tumbling yields, according to ratings agency Moody’s. Vanessa Robert, a vice president and senior credit officer at Moody’s, said: “Investors have very few suitable, equally safe alternative investments in the current uncertain environment. Lower investor confidence and higher risk aversion could continue to cause corporate investments to be postponed, leading to inflows into low-risk, highly liquid assets such as money market funds.”
Oak Hill wins Glasgow mandate
Glasgow City Council has appointed Oak Hill Advisors to run a multi-asset credit mandate aimed at achieving a return of LIBOR plus 4% a year. The mandate will be focused mainly on high-yield debt and syndicated loans, but will also have other liquid debt assets. In a statement, the council said: “The main purpose of this mandate is to provide exposure to higher yielding credit market beta. We do not envisage that hedge fund strategies or extensive use of leverage to be appropriate.” The mandate size has provisionally been set at £300m.
“Scottish PWLB” idea mooted
Scottish Green MSPs have called on the creation of an equivalent body to the Public Works Loan Board, controlled by the Scottish Government. A report on local government debt in Scotland said that councils north of the border often spend half their council tax revenues on servicing debt. Patrick Harvie MSP, finance spokesperson for the Scottish Greens, said: “Given the crisis facing local authority finances, it’s unacceptable that councils are using council tax revenue to deal with historic debts that enrich private banks and the UK Treasury. The unethical nature of the loans from private banks justifies cancellation of these payments, and the Westminster government should write off council debts to end the unfair squeeze on local services.”
