News Roundup: Rate rise ‘could produce greater yields’, Grover leaves London CIV, PWLB lending slows
0Rate rise ‘could support council funding levels’
The Bank of England’s Monetary Policy Committee has voted by a majority of 7-2 to increase the base interest rate by 0.25 percentage points, to 0.5%. In a statement, the bank said: “All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.” Paul Dossett, head of local government, Grant Thornton said that the impact on local government would be limited but that “the rise could potentially produce greater yields from some of the new types of investment, which is vital to help support general fund balances. But it also poses a risk and raises questions around future borrowing rates as many councils will need to borrow in order to help boost housing supply in their areas.”
Grover leaves London CIV
Hugh Grover is to step down as chief executive of the London Collective Investment Vehicle, the first fully authorised and regulated investment management company set up by local government in the UK. Mark Hyde-Harrison, currently head of defined contribution strategy at consultancy Willis Towers Watson, has been appointed interim chief executive. Grover said: “It’s been an honour and a privilege to be the first CEO of London CIV, but it is time for me to pass the baton to someone new who will take it into its next phase of development.”
CIPFA explores due diligence on investments
Warrington Borough Council’s head of corporate finance Danny Mather, together with Camdor Global’s Bob Swarup, has co-written an in-depth overview of due diligence carried out on the authority’s recent £200m purchase of a business park. The deal, which is the second biggest commercial property deal ever carried out by a local authority, was completed in September. In a case study produced for CIPFA, Mather said: “The ultimate aim of the due diligence process is to convince you that the investment you select is genuinely suited to your investment and other needs. If there is any niggling doubt, the answer is simple. No matter how good it may seem in other respects, walk away.”
The report will be made available on the CIPFA website here.
PWLB lending slows in October
The Public Works Loan Board lent £261m to councils during October, according to figures from the Debt Management Office. The figure is down on August’s £468m total which was the second highest month’s lending during 2017. In October, West Dunbartonshire Council took the most money with two loans totalling £30m.
Bristol in homelessness fund investment
A second tranche of £5m has been invested by Bristol City Council in the National Homelessness Property Fund. The money will allow the fund’s manager, Resonance, to build 100 homes for homeless people nominated by the council. Bristol mayor Marvin Rees, said the investment meant “the council will save money in the long run by relying less on expensive emergency temporary accommodation”.
Warrington MP questions council lending
Warrington North MP Helen Jones has raised questions about financial transactions being carried out by Warrington Borough Council. Quoted in the Warrington Guardian, Jones said she was concerned that loans allocated for housing associations were not guaranteed to end up in the town. She added: “”I have also asked whether the council’s involvement in the Redwood Bank is conditional on loans being made to small and medium-sized businesses in Warrington.” She ended her comments by saying: “All I can assume is that the local finance officers are being outgunned by people with much more expertise than they have.”
Stoke burns through reserves
Stoke-on-Trent City Council’s pot of “usable” reserves fell from £199m in March 2016 to £136m in March 2017. The council used £15.45m to plug a gap in its budget for 2016/17, with reserves set to be depleted further in coming years. Labour members of the council’s corporate services overview and scrutiny committee have criticised the rate at which reserves are being spent, according to local newspaper The Sentinel.
Pension funds take shopping centre stake
Greater Manchester Pension Fund and West Yorkshire Pension Fund have bought a 50% share in Norwich’s Intu Chapelfield shopping centre. The funds will jointly acquire a 50% stake in the centre for £148m, which made a net rental income of £15.5m in 2016. The deal, which will see Intu Properties retain ownership of the other half of the centre, represents a net initial yield of 5%.
Norfolk creates social impact bond
Norfolk County Council has become the latest organisation to create a social impact bond. The council will pay a subsidiary company if it manages to keep children out of care. It says that the deal could save £7m over five years, helping take pressure of its social care budget. The Vulnerable Child Social Impact Bond would target 360 children aged eight to 15 over the eight-year life of the project.
