Torfaen’s Nigel Aurelius on property management and treasury

Nigel Aurelius is assistant chief executive, resources, and S151 for Torfaen County Borough Council. He started at the council in 1996, becoming chief finance officer in 2005 and assistant chief executive four years ago. His first job was in payroll with Gwent and he has just celebrated 34 years in local government.

Room 151: You have changed your investment strategy from having a handpicked list of counterparties to using a set of criteria. Has this resulted in any recent new investments? Are you using overseas banks, for example?

Nigel Aurelius: Not at the moment, the reason that we broadened it was because we had a handpicked list of institutions around 2008 everything was going rather silly in the world and the UK was viewed as a safe haven. As the concerns regarding the banks were raised we decided that the time was right to go to a criteria basis for investments. At the moment it hasn’t resulted in any change because we are trying to use as many of our internal resources as possible to fund and keep investments down to a minimum.

Room 151: Wales has a nation-wide 21st Century Schools Programme: what sort of capital commitment do you have to make to this and how do you do it?

NA: The programme was designed by the Welsh government which wanted to bring up school building standards. Across our estate we had to grade our buildings in terms of amounts of work needed and then come up with a programme to identify what it would cost to bring them up to the required standard. During the gestation of that project, austerity arrived and the Welsh Government’s funding allowance was hit so now we have bands for the project. Band A is our schools most in need of replacement or significant enhancement.

Our programme is £81m and we have to put in 50% over five years starting from 14-15. We’ve got to do it on business case models with the Welsh Government so they sign off at each stage but challenge us on the design specifications.

So our 50% is funded from capital allocation from the Welsh Government, prudential borrowing, capital receipts, sometimes from school closures. Borrowing will be £10m, core capital £13m and capital receipts £17m. It is a big commitment but we have been successful in the past with having big new schools and investing in infrastructure so members have seen what it can do if you take a strategic approach. It’s not easy for members to shut schools though and shutting them now with the promise of reinvestment maybe two years down the line is difficult but they are holding to it.

Room 151: The council has done some work on rationalising office space. Where are you with this? Is there more to come?

NA: We occupied a big former county council building a few miles down the road and had a lot of split sites from when we all came together in 1996. The former building needed a lot of maintenance and so we came out of it, moving 650 staff. We’ve shrunk into buildings that we were occupying simultaneously and also are sharing with other organisations. In Pontypool here we share with the police which makes good use of public estate but also has kept the police station open.

We saved a lot of revenue money from that as we were running the new buildings anyway and the old building was expensive to run. In doing that we’ve also adopted in many of the offices a ‘seven-to-ten’ policy, so ten staff for every seven desks. We have people like social workers who don’t need a desk all the time and with the old way desks would often not be occupied. If your job does require you to be office based you do have a desk but we have hot desks. There’s still work to be done with buildings, some people are in another police headquarters neighbouring our old building and we’re moving more people. We like the idea of sharing with other organisations: we have some registered social landlords and have housing staff in there with them rather than here with us, there are work synergies in what they do. We also share with other councils; it’s all about bringing our revenue cost base down and getting rid of assets we’re not using.

We shared the ownership of our old big building with our neighbouring council Monmouthshire and have just finished demolishing it, it was a strange old 60s building and we will be marketing it to realise a capital receipt. From the savings we made we were able to put a quarter of a million back into the budget and we have got as much to save again.

Room 151: And how about the energy saving work?

NA:Yes as part of the office moves we did work on energy efficient light fittings, power down sockets so that if people leave their PCs or printers they automatically power themselves down and shut themselves off. We’ve also done work around street lighting: we turned a number of street lights off some years ago and through our energy efficiency work we’ve found we’ve been able to re-introduce some of the lamps without raising carbon emissions. We’ve also installed automated meter readings and centralised energy statistics so that we can identify if we have water or energy usage, for example, in a school at the weekend, and through that we’ve identified leaks. It’s all good housekeeping stuff.

Room 151: We’ve seen the relaunch of TSB and are waiting on RBS’ split – how are you feeling about UK banks at the moment?

NA: It’s a difficult one to answer, there is still a lot of uncertainty. Lloyds seems to be fairly positive at the moment, there are questions on RBS and of course there’s the problem with the Co-op bank, which is our bank. We obviously wouldn’t lend money to them, cash balances are kept to a minimum and our view is in general things remain fragile and our investment strategy reflects our cautious approach. At least it doesn’t feel as bad as 2008.

Room 151: You state that any change from CNAV in MMFs will cause you to move out of MMFs. What will be the alternative?

NA: Probably call accounts with instant access. Or we might try to stagger our fixed investments in a different way and shorten them. We use the MMFs for shorter stuff and all the talk makes you concerned about capital security. It could be that if these stable shadow NAVs hold then we could revisit that idea, but it is when you enter a period of volatility that those things will move.

The problem for treasury management in local government is that we have become far more cautious since Iceland even though we weren’t hit in Torfaen. But a lot of people took very reasonable approaches and were doing nothing other than what could be deemed as correct and they got caught out. It has led to a degree of caution but the question is at what point does caution become not good practice in itself?

Room 151: Are there any other areas Torfaen is looking at to make savings or generate revenue?

NA: Over the last few months we’ve put our leisure centres into a leisure trust that we established ourselves, that generates some savings through having a more commercial approach.

We’ve gone into collaboration with four authorities on school improvement services so we’re getting a better service at slightly reduced cost.

We’re about to start a review of services and will very definitely be looking at more collaboration, that is a big driver in Wales: with the Williams Commission we could be facing some kind of reorganisation again so we’re looking at collaborative options and already have a number in place already. Wales is a small country, we have 22 local authorities and the Williams Commission is pushing us in this direction but we are open to collaboration, particularly around social care and health. Working across institutions and organisations will be essential to survive.

Room 151: Does Wales have any access to localised taxation like the deals offered in some of the England’s City Deals? If not is that something you would like to see?

NA: We don’t have anything. I think Welsh Government are looking at something around City Regions but my personal view is it is difficult here, we have smaller authorities, rural authorities; a city like Cardiff might be able to take advantage of localised taxation but a smaller authority might struggle.