• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

NAO claims poor stats ‘hiding’ effects of local government shift in capital spending

0
  • by Colin Marrs
  • in Development · Funding · Resources
  • — 3 Nov, 2016
National Audit Office, Andy Aldridge, Flickr (cropped)

National Audit Office, Andy Aldridge, Flickr (cropped)

The implications of the shift among councils towards using capital spending to generate revenue is in danger of being missed by the Department of Communities and Local Government, according to a senior figure at the National Audit Office.

Speaking at the CIPFA Treasury and Capital Management Panel annual conference in London, Aileen Murphie, a director at the National Audit Office (NAO), said that national data collected by DCLG is not sufficiently robust to track and analyse the new trend.

Room151 last week reported that local authorities are likely to complete £1bn of commercial property deals by the end of the year – with real estate just one of a number of areas in which councils are attempting to use capital to provide long term revenue sources.

Murphie said: “We have made strong representations to DCLG that they have to improve the way you can see into the data because about 75% of spend is in one category.

“The headline (capital spending) figures are hiding the marked changes in investment strategies and the resulting nature of capital spending that is going on.

“It is clear that councils are not prepared to borrow to support spending that won’t cover own debt costs or generate income. It is quite a big difference.”

She said that the data issues, along with the devolved nature of spending, “don’t allow the DCLG to identify issues building up in the system”.

Murphie called on the department to focus more on capital spending in preparation for the next spending review.

She said: “The work that is done in the run up to spending reviews is usually focused on revenue. With the greater interaction between capital and revenue we think it is really important to give it much greater prominence.”

Councils undertaking property investments must also be aware of the long- term management costs involved.

“There is a big concern about investing in the long-term management of core assets and pushing the cost of the maintenance backlog into the future,” she said.

“At some point we will have to maintain those assets so we also have to think about that.”

During her speech, Murphie also voiced worries about the government’s approach to offering more flexibility for councils on how they spend their capital receipts, a measure announced earlier this year.

“The department didn’t try to model how many people will use it, or how much money was there,” she said.

“It is a significant new flexibility put into the system without really any understanding of what the implications will be, so we didn’t like that too much.”

Issues are also arising from the uneven effect of government cuts to central grant funding.

One group of authorities is “doing much worse than everyone else and at some point, those are the ones that may likely fall off the cliff — or more likely one or two of them will”, she added.

She said: “I think one of the things the department finds difficult, in its role as the steward of the local government financial system, is to comprehend the implications of the way they handle reductions.

“They have increased variability and complexity across the piece rather than reducing it. That makes it very difficult from a Whitehall management perspective to work out what to do next.”

Get the Room151 Newsletter

Share

You may also like...

  • Asset sales to fund equal pay claims Asset sales to fund equal pay claims 9 Jan, 2013
  • Mark Barrow on LEPs, TIFs & the pursuit of growth Mark Barrow on LEPs, TIFs & the pursuit of growth 15 Mar, 2013
  • £1.5bn green retrofit for Birmingham property £1.5bn green retrofit for Birmingham property 10 Apr, 2012
  • ALMO funding issues prompt move to insource housing services ALMO funding issues prompt move to insource housing services 17 Oct, 2019

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 2 days ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 7 days ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 7 days ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 1 week ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 1 week ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 1 week ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 1 week ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 1 week ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 1 week ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 1 week ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 1 week ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 1 week ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 1 month ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 1 month ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story News round-up: PWLB borrowing drops, Brexit threatens rating, abolition call for LA taxes, housing association strategies
  • Next story Council leader attacks investment managers and threatens to withhold £65m from pension fund

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK