News Roundup: Lancs investment profits, Settlement strife, WMPF sacks hedge funds…

Settlement: “Most difficult yet”
Savings to be made after the financial settlement for 2015-16 will be the “most difficult yet,” according to the Local Government Association.
Papers released this week show councils across England will receive a cut of 8.5% to funding from central government. The LGA says the impact will mean finding aggregate savings of £2.5bn from council budgets.
Whitehall has decided to provide £74m to upper-tier authorities next year in a reversal of its decision to remove financial assistance for Local Welfare Assistance Schemes. However, the support is substantially cut. Funding for 2014-15 was £172m.
CIPFA’s chief executive, Rob Whiteman, is quoted in the press saying the government had listened to local government about the funding but £74m was unlikely to be enough.
The LGA said councils now faced stark choices. The LGA’s chairman Cllr David Sparks, said: “In reality, cuts to budgets for things like fixing the roads and keeping parks open will have to be much bigger.
“Councils will have to divert more than £1 billion from other services in 2015/16 just to try to stem the crisis in funding for adult social care for another 12 months.”

Investment profits of £52m for Lancashire CC
A profit of £52m on investments in financial markets has been banked by Lancashire County Council.
The council said the investment had been almost entirely in gilts.
Deputy leader and portfolio leader, cllr David Borrow, said: “This is a very welcome windfall brought about by the skills of our investment experts who took a low-risk position ahead of the rest of the market, which followed our lead in looking for the kind of low-risk investments we hold .
“We are still facing unprecedented reductions in funding but this money strengthens our financial position and takes us closer to balancing our budget for the next three years. We have to treat it as a one-off and use it carefully but it certainly puts the council on a firmer footing.”
Precise details of Lancashire’s investments and rate of return are yet to emerge. Investment activity is headed by Mike Jensen, chief investment officer who joined the county council in 2009 from Bank of America.

Capital hardest hit by cuts to housing payments
A cut in the funding for discretionary housing payments will hit the capital harder than any other area in the country, according to London Councils.
The Department for Work and Pensions revealed a week ago that national funding for discretionary housing benefits would fall by 24% from £165m to £125m in 2015-16.
London councils estimates that the capital’s funding will go from £51m in 2014-15 to £33-35m next year.
London Councils chairman Jules Pipe said: “This reduction will hit the capital harder than the rest of the country – we calculate that London boroughs will see a cut of more than 35% in 2015/16, compared to a 24% decrease nationally.”
He added: “Any reduction in DHP funding will place more London families at greater risk of homelessness, and we strongly urge against it.”
London councils made almost 50,000 discretionary housing payments last year, 13,000 to households affected by the benefit cap.

West Midlands PF withdraws from hedge funds
Around £200m in investment allocation has been withdrawn from hedge funds by the West Midlands Pension Fund.
The pension scheme manages around £10bn of assets.
Reuters quotes a spokesman for the fund saying: “The funds are to be allocated to other assets in which the fund invests, especially those areas where we are under-allocated.”
West Midlands offered no further explanation though Reuters reports that other funds representing public sector pensions – the California Public Employees’ Retirement System and PFZW, representing health sector workers in the Netherlands – have pulled out of hedge funds citing “high costs, complexity and poor performance”.
Last year West Midlands was part of a group of pension funds that developed and published a guide to responsible investment. Mark Chaloner, assistant director (investments), said: “This landmark guide sends a clear signal to the marketplace as to what asset owners expect regarding their responsible investment reporting from fund managers of listed equity.”

Moody’s backs regulatory change for housing associations
Ratings agency Moody’s has given its backing to change in the regulation of English housing associations saying it will help ensure that social housing assets “are not put at undue risk”.
In a report Moody’s adds that housing associations should now be more “resilient” against risks such as the increasing complexity of funding structures.
“The proposed changes to the regulatory framework are positive for English housing associations, as they require them to pay close consideration to the risks they are exposed to, and set out how they would respond to adverse consequences if these risks cannot be mitigated effectively,” says Roshana Arasaratnam, a senior credit officer at Moody’s.
The regulatory changes will place an added emphasis on risk management, cash adequacy and stress testing.
The agency says the main risks facing housing associations are the potential impact of welfare reform, a reduction in grants and changes in the financial markets.