151 BRIEF

  • London councils see budgets slashed

    London councils have seen their budgets slashed by 17% per head over the past eight years, according to analysis by think tank Centre for London.

    In a new report, the body analysed government spending data, and found that inner London boroughs have been hit the hardest by cuts.

    Planning and development budgets have been cut by 59% since 2010/11, with highways and transport seeing a 54% fall and cultural activities being cut by 42%.

    Silviya Barrett, research manager at Centre for London said: “London boroughs, like other urban authorities across the country, have shown great ingenuity in adapting to hard hitting cuts, but they are running out of road.

    “There are also concerns that the forthcoming Fair Funding Review will affect the longer-term funding allocations of those councils that have seen the biggest cuts.”

    Inner London boroughs saw the biggest cuts over the period, with Westminster (-32 per cent), Newham (-30%), Tower Hamlets (-29%), Hackney (-28%), Camden (-25%) and Wandsworth (-25%) all seeing cuts of 25 per cent per head or above.

    Just two councils, Barnet (+1%) and Kensington and Chelsea (+10%) saw increases over the last eight years.

    Peter John OBE, chair of London Councils, said: “Boroughs cannot deal with austerity for much longer. It is time for government to listen to our concerns.

    “The Spending Review later this year must seriously address the sustainability of vital local services.”

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  • Ministry proposes four-year LGPS fund valuation cycle

    The government is proposing to change the valuations of Local Government Pension Scheme (LGPS) funds from three to four years.

    This would bring local valuations in line with the government valuation of the LGPS which has moved to a quadrennial cycle.

    The Ministry of Housing, Communities and Local Government included the proposal in a consultation on changes to the local valuation cycle and the management of employer risk, launched this week

    The consultation wants to ensure that lengthening the cycle would not increase the risks that funds face, with the valuations used to set employer contribution rates and to assess whether funds are on target to meet their future liabilities.

    The government is therefore proposing some measures to offset the enhanced risks.

    These would allow LGPS funds to undertake interim valuations, and for administering authorities to take action when circumstances change between valuations.

    The ministry is planning to enhance the powers of LGPS administering authorities to amend employer contribution rates between valuations.

    In addition, the ministry is seeking consultation proposals to enhance flexibility on exit payments, further changes to exit credits, and changes to the non local-authority employers required to offer LGPS membership.

    The MHCLG says: “Current regulations require that when the last active member of an employer leaves the scheme, the employer must pay a lump sum exit payment calculated on a full buy-out basis.

    “We are seeking views on two alternative approaches that would reduce the cliff edge faced by employers…”

    The first proposal to increase flexibility on exit payments would allow funds to defer the triggering of the exit payment for employers with strong covenants.

    These would be granted the status of ‘deferred employers’.

    The second would allow the recovery of the exit payment to be undertaken flexibly over a period of time where the administering authority does not feel that the employer qualifies as a “deferred employer”.

    In 2018 the LGPS regulations were amended to allow the payment of exit credits to employers which are in surplus when their last active member leaves the scheme.

    This has led to problems where LGPS employers have outsourced services and used contractual arrangements to share risks with the contractor.

    The consultation wants to canvass views of addressing this issue.

    The changes to the employers required to offer LGPS membership will remove the requirement for further education corporations, sixth form college corporations and higher education corporations in England to offer new non-teaching staff access to the LGPS.

    The consultation will run until 31 July 2019.

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  • Sunak defends removal of deprivation as core funding factor

    Local government minister Rishi Sunak has defended the government’s proposals to remove deprivation as a factor in deciding councils’ foundation formula.

    The proposals have been met with dismay across the sector, with the Institute for Fiscal studies saying in February that the proposal to base the foundation formula on population alone “is weak”.

    Speaking in a Parliamentary debate in Westminster Hall, Sunak said: “Deprivation is in the formula and in all the areas where it makes a significant difference.

    “Deprivation has little to do with the cost of maintaining a road or a flood defence, for example, and therefore it is not factored into those areas.

    “Of course, it is factored into all the areas that we heard about, including adult social care and children’s social care.”

    The minister added that his department is working in conjunction with other departments “to develop formulas that they are happy with”.

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  • Lincolnshire set to create legal services company

    Lincolnshire County Council was set to approve the formation this week of a legal services company, to be licensed by the Solicitors Regulation Authority (SRA).

    Regulation by the SRA will allow Legal Services Lincolnshire (LSL) to help meet the legal needs of its partners as they seek to carry out their functions through new structures, such as companies, without the risk of falling foul of the SRA’s requirements as the regulator of solicitors.

    LSL is a service shared between the county council and most of the county’s district councils – Boston Borough Council, East Lindsey District Council, North Kesteven District Council, South Holland District Council and West Lindsey District Council.

    These partner councils have already indicated their support for the formation of the new company.

    LSL is hosted by the county council, and most of its work is carried out on behalf of the county and district councils, though it does also undertake some external work for other public bodies.

    Guidance from the SRA indicates that there may be limits to LSL’s ability, as an in-house body, to provide services to the partners when they act through other entities.

    The creation of an Alternative Business Structure (ABS) will overcome these restrictions and allow LSL to follow its partners’ work however it is delivered, and also allow it to pursue external work.

    Though currently small, providing external services has been identified as a potential source of growth.

    An ABS is a solicitor firm, usually set up as a limited company, and licensed by the SRA to provide legal services, where the owners of the company include individuals and entities who are not qualified solicitors.

    If the proposal goes through, Lincolnshire would be following in the footsteps of other local authorities, including Hertfordshire, Warwickshire and Kent County Councils.

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  • Green puts out feelers on social care system reform

    Damian Green, former first secretary of state, and current chair of the All Party Parliamentary Group on Longevity, has made a series of recommendations to ensure the adequate funding of social care.

    Green’s proposals come ahead of the government’s long-awaited green paper, publication of which has been repeatedly delayed.

    A joint report by the House of Commons Health and Local Government Select Committees last year estimated the funding gap for social care will between £2.2bn and£2.5bn in 2019-20, with the pressure relentlessly rising as the population ages.

    Green’s proposals contained in ‘Fixing the Care Crisis’, a paper for the Centre for Policy Studies, call for £2.75bn to be made available immediately, which he suggests could be financed by taxing the winter fuel allowance for the over-65s, a 1% surcharge on national insurance paid by the over-50s, or savings made in other areas of public spending.

    Green’s plan drops the 2017 Conservative manifesto commitment under which people would be allowed to keep £100,000 in assets, whatever the costs of their care – a plan which became known as the ‘dementia tax’.

    In the longer term, the government should be responsible for a new Universal Care Entitlement, to be supplemented by an optional Care Supplement, financed by voluntary payments.

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  • Newham votes to join counter fraud hub

    London Borough of Newham’s cabinet this week voted to become the latest to join the London Counter Fraud Hub.

    The hub is supplied by CIPFA, in partnership with BAE Systems, and has an initial focus on identifying fraud in relation to the council tax single person discount, business rates, and housing tenancy.

    It is hoped to increase the range of targeted fraud at a later date.

    Councils and third parties supply data to the hub, which then uses advance analytics to flag up alerts.

    The hub was launched in December 2015, as an initiative supported by London Ventures, a partnership between London Councils and EY.

    Testing has been carried out by four pilot authorities: Camden, Ealing, Islington and Croydon.

    Results suggest that if all 33 boroughs signed up, the hub would save between £15m and £30m in its first year, and recover 1,500 council homes that are illegally sub-let.

    Councils will have to pay a joining fee of £75,000, plus an annual subscription fee of £90,000 for large authorities like Newham, and £70,000 for small authorities.

    The GLA supports the council tax and business rates elements of the hub.

    Councils wishing to sign up will have to do so for seven years, a period of time necessary to recoup the large upfront investment.

    For the scheme to be financially viable, it needs 26 of London’s authorities to sign up.

    Over time, it is hoped the hub will expand to include authorities bordering on London, housing associations and other public bodies.

    Newham, along with the other London local authorities, signed a memorandum of understanding, making a non-binding commitment to the project in 2015.

    The borough estimates that the benefit of joining could be as high as £1.4m over the seven-year life of the contract, without consideration of the extra funding that will be needed as the hub’s activities expand.

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  • Brunel invests $60m into ESG-focused equity fund

    Brunel Pension Partnership (Brunel) has invested $60m into the Neuberger Berman Private Equity Impact Fund on behalf of four of its LGPS member funds.

    The pool says that the fund would incorporate a strategy to encourage the integration of environmental, social and governance issues.

    Richard Fanshawe, Brunel’s head of private markets, said: “The fund is ground-breaking in seeking attractive financial returns in lockstep with positive social and environmental impact, having identified investable themes that can map to 15 of the 17 UN sustainable development goals. “We fully support this ambitious approach.”

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  • Surrey calls a halt to investing outside its borders

    Surrey County Council has put a temporary stop to investing in property outside its area, and will instead concentrate on selling off, or reusing empty buildings which it already owns.

    The council is looking to reduce its operational buildings (excluding schools) from 300 to 100.

    The plans include relocating its headquarters by 2020, selling off its current site at Kingston and moving to a new ‘small’ civic  centre in Guildford or Woking, with a final decision on the site due in July.

    The council hopes to save £10m in costs by 2024 and to generate £150m in capital receipts over the next five years.

    Surrey has an investment portfolio both within and outside worth £425m at the most recent valuation.

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  • Hampshire pension fund appoints J.P. Morgan Alternative Asset Management

    Hampshire County Council Pension Fund has appointed J.P. Morgan Alternative Asset Management to run a private debt portfolio manager for a bespoke “fund of funds”.

    The fund has awarded the £812,500 private debt contract after selecting the firm from 14 applicants.

    JP Morgan will be expected to deliver risk-adjusted returns for an initial five-year period.

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  • Council housing company loses £900,000 in first year

    London Borough of Barking and Dagenham’s wholly-owned housing company BeFirst made a trading loss of £900,000 in the first six months of its operation.

    Annual accounts covering 2017/18 for the company showed an overall loss of £3.9m, of which £3m was made up of its opening pension liability.

    However, a report that went to councillors said that the company – which began trading in October 2017 – “remains committed” to achieving an income to the council of £10.3m by 31 March 2021.

    The report said that the latest management accounts position for 2018/19 shows an indicative pre-tax profit of around £500,000.

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