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Room 151

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RSG down £95m, Detroit & the LGPS, Renewables funding, Stockport JV, SIB risk/return

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  • by Jo Tura
  • in 151 News
  • — 1 Aug, 2013

Councils another £95m down
The Department for Communities and Local Government has told local authorities that they will not receive £95m in revenue support grant after it underestimated the financial protection councils might need against fluctuations in business rate income. In its technical consultation document on the finance settlement DCLG said that the safety net it needs to help councils who see falls in business rate income must be five times its original estimate. Therefore, read the document: “the department will need to increase the amount of revenue support grant held back in 2014-15 to repay the cost of the additional demand on the safety net for 2013-14 and to have sufficient funding to meet safety net payments in 2014-15.”

Beware Detroit in the UK, warn actuaries
Consultants at Broadstone Pensions and Investments, a pensions advice firm, have warned that the UK is not immune from a Detroit-style bankruptcy. John Broome Saunders, an actuary at the firm, commented: “Received wisdom in the UK is that local authorities don’t go bust – and therefore it follows that robust funding of their pension obligations doesn’t really matter. Events in Detroit provide a cautionary tale highlighting the naivety of such an attitude. UK central government has made clear efforts to improve the security of private sector pension schemes over the last few years – perhaps it should now turn its attention to local government schemes, before a Detroit-style insolvency leaves an entire region with tens of thousands of impoverished pensioners.” Broome Saunders highlighted the £200 billion in local government pension liabilities in the UK across 100 schemes. “Pretty much every single scheme is in deficit, most schemes have adopted higher-risk investment strategies, and none of these schemes is protected by the Pension Protection Fund,” he added.

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Stroud bags renewable energy money
Stroud District Council has received a £900,000 grant to install air source heat pumps into council houses. The funding comes from the Social Landlords Renewable Heat Premium Payment competition and is bigger than the total award given to the whole of Scotland. Energy efficient heating will be installed in 400 houses.

Stockport goes for property JV
Stockport Metropolitan Borough Council entered into a joint venture with Carillion for the management of the council’s property services. Initial value is around £100m but this could grow as scale and scope of service delivery increase. The JV will be known as the Stockport Strategic Property Partnership.

SIBs must provide better returns – report
Social Impact Bonds (SIBs) must offer lower risks or higher returns to attract commercial investors, according to a new report. Risky Business from the Social Market Foundation argues that there is a “huge gulf” between what commissioners are prepared to pay and the return investors will accept. The current nature of SIBs also makes them costly to set up, the report added, increased scale and numbers of SIBs would make them more attractive to investors.

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