News Roundup: Councils trading billions, bond bubble, MMF ratings, LGPS scrutiny boards, London CIV
0Council trading set to generate billions
Councils could generate savings of £2bn through entrepreneurial activities, according to think tank Localis. A survey it conducted found that currently such activities – joint ventures and trading companies – make up around 6% of council budgets. However, respondents indicated that by 2020 this figure could reach 18%. At present, 58% of councils own a trading company, Localis discovered.
Investors identify bond bubble
Bond values are overvalued, according to record levels of professional investors. The proportion of investment professionals that believe corporate bonds overvalued is now at 76%, according to professional body CFA Society of the UK. Government Bonds continue to be perceived as the most overvalued asset class according to 81% of investors.
Fitch keeps MMF ratings steady
Fitch Ratings has affirmed 38 European money market funds’ “AAAmmf” ratings, following a review of the sector. The announcement this week covers a number of Sterling funds. However, Fitch said it will monitor how MMF managers who have exposures to those banks which are on negative outlook proactively manage them.
Funds “could do more” over scrutiny boards
Some local government pension funds are doing only the minimum amount to comply with regulations requiring the creation of oversight boards, according to a pensions advisory firm. However, William Bourne, director at City Noble, said that others see new Local Pensions Boards as a valuable way of alloying employers and members a more formal oversight role. “It is our understanding that Department for Communities and Local Government will give schemes several months’ grace to establish the LPBs and will then conduct a survey of how they are progressing towards the end of the year or in early 2016,” he said.
Public “would support council tax rises”
Three quarters of the public think that public services should be run by the government, local authorities or the voluntary sector, rather than by private companies, according to a new poll. The YouGov survey on behalf of campaign group Locality found that 58% would support a slight increase in council tax if it meant they received higher quality public services. Locality chief executive Tony Armstrong said: “People are fed up of their taxes being pocketed by massive national companies who give them a tawdry deal.”
Chiefs voice long-term service worries
Nine out of 10 council chief executives believe they won’t be able to protect frontline services in five years time, according to a survey by consultancy PwC. The firm’s fifth annual “Local State We’re In” report found that while seven out of 10 remain confident about managing savings in the short term, the number drops dramatically when asked about a longer horizon.
Commission “needed for devolution transparency”
The government should establish an independent city devolution commission to add transparency to the process of handing powers to local and regional government, according to the RSA. The body, which released a report on regional growth last year, said that such a body would “bring transparency and legitimacy to what has so far been an evolving series of ad hoc deals and closed door arrangements”. The new body would work up policy detail and guide draft legislation, it said.
Derbyshire looking for more property investments
Derbyshire County Council Pension Fund is planning to shift more money to direct property investments. It has issued a tender for investment managers to look after existing property assets and oversee the diversification strategy. At present, the council has £3.4bn of assets, of which £104m is held in direct property investment.
Social care soaks up increasing council tax share
More than half of what people pay in council tax will soon be spent on caring for vulnerable children and adults, creating a huge squeeze on councils’ ability to fix roads, clean streets and keep libraries open, according to the Local Government Association. LGA chair David Sparks said: “It is likely that people will be paying similar levels of council tax over the next few years but most will see a lot less in return. People are rightly going to question why their streets and parks are less well kept, the local library is closing and bus services are being cut when they are still paying roughly the same council tax each month.”
London seeks chief executive for CIV
London councils are seeking a chief executive to manage their new collective investment vehicle for pensions investment. An advert has been placed in a public sector finance magazine for the role, which will pay a salary of around £130,000 a year. The CIV is aimed at achieving economies of scale, providing a platform for significant cost savings, and opening up opportunities to invest in alternative asset classes.
Councils kept NHS cash
Sixteen local authorities failed to pass on hundreds of thousands of pounds specifically allocated by central government to fund NHS complaints advocacy services, according to Health Service Journal. It published data collected by Healthwatch England under the Freedom of Information Act, which showed 13 councils failed to hand on more than £50,000 each to their advocacy provider and three counties – Suffolk, Kent, and Hampshire – failed to pass on more than £100,000.
