• 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

Investment guidance: are regional rules helping?

0
  • by David Green
  • in Blogs · David Green · Recent Posts
  • — 23 Aug, 2012

Local Government is a devolved matter in the UK, meaning that the regional governments in Wales, Scotland and Northern Ireland set their own laws, regulations and official guidance for local authorities to follow.  At first glance, this seems one of the most obvious areas for Westminster to devolve responsibility.  But since most decisions are devolved further to the local councils themselves, do we really need four separate sets of rules on how those decisions should be made?  Investment regulations are a good example of where we have some odd regional differences.

The purchase of certain investments such as shares and bonds can be classed as capital expenditure, as a method of government restricting, but not prohibiting, their use by local authorities.  Corporate bonds, for example, are only capital expenditure in England if they were bought before April 2012.  In Wales and Northern Ireland, it is not the date, but the purpose of the purchase that is important – corporate bonds bought for service purposes are capital expenditure, whereas those bought for treasury management reasons are not.  Share purchases are always capital expenditure in Wales, and usually are in England too, unless they are shares in a pooled fund or unit trust.  Listed shares are not capital expenditure in Northern Ireland if they were bought for treasury management purposes.

Official investment guidance in England, Wales and Northern Ireland includes the concept of specified investments, which are supposed to be relatively low risk and to which authorities “need only make minimal reference in their strategies”.  But due to small differences in definitions, building societies without credit ratings but otherwise of high credit quality are specified in England and Wales, but not Northern Ireland.  Constant net asset value money market funds are specified in England and Northern Ireland but not in Wales, while accumulating money market funds are only specified in England.  Certificates of deposit can be specified investments in Northern Ireland if bought from the issuer on the primary market, but not if bought from another investor on the secondary market.  This rule was introduced in 2011 despite the Welsh Government dropping a similar rule in 2010.

Scotland does not have specified investments, but permitted investments instead.  There is no restriction on what can be permitted, including company shares and investment properties, but limits must be set on the maximum held in each type of permitted investment. In the rest of the UK, limits are only required on non-specified investments.  Making non-permitted investments is against the law.  Scottish guidance is the only one to require an investment report after the end of the financial year, in addition to the strategy report before the start of the year.  It is also the only one requiring authorities to review their holdings of long-term investments; the governments of the other three nations are apparently content for local authorities to buy and forget.

I’m all in favour of localism, devolving decisions down to the most appropriate level.  But I fail to see what purpose is served by having four sets of investment guidance, unless it’s to keep people like me in a job!  Surely deciding whether money market funds or certain corporate bonds are low risk depends entirely on each individual council’s risk appetite and investment profile.  It’s a subject that Westminster, Holyrood, Cardiff Bay and Stormont should interfere with as little as possible.

———————————————————————————————————————————————–
The Local Authority Treasurers’ Investment Forum September 25th, 2012, London Stock Exchange
———————————————————————————————————————————————–

Share

You may also like...

  • Economic update on China Economic update on China 21 Aug, 2012
  • Lending a hand Lending a hand 21 Nov, 2013
  • Government consultation and draft guidance on LGPS pooling Government consultation and draft guidance on LGPS pooling 16 Apr, 2019
  • Euro Survival Hinges on Italy Euro Survival Hinges on Italy 10 Nov, 2011

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 14 hours ago

    How can local government ‘build back better’?: Beverley Gower-Jones looks at the options for driving small business entrepreneurship in clean technologies. Innovation is essential for local authorities to save money and reduce emissions, it is the… dlvr.it/RtT3nS pic.twitter.com/bSMB6OG70t

    Room151 17 hours ago

    Helen Randall: Spelthorne report places spotlight on ‘controls’: Fresh criticism of Spelthorne Council raises the question of what “good” controls look like when negotiating a property deal. Spelthorne Council’s continuing debacle over property… dlvr.it/RtSPhy pic.twitter.com/9uCOJgBcH6

    Room151 17 hours ago

    Step-out strategies: Hitting the sweet spot between liquidity and ultra-short duration: Sponsored article: Jemma Clee describes how an ultra-short duration strategy can help local authorities enhance returns. Despite the expectation of a low, and… dlvr.it/RtSPZb pic.twitter.com/pdXPpv5lcN

    Room151 2 days ago

    What role will climate change have on the pricing of government bonds?: Sponsored article: Kerry Duffain finds that “vulnerability and resilience to climate change” have a significant impact on the cost of government borrowing. Ardea Investment… dlvr.it/RtNKv7 pic.twitter.com/wDjT31x4Yt

    Room151 2 days ago

    ESGenius: Slashing emissions will fuel green growth for decades: Sponsored article: Velislava Dimitrova argues that a big enough investment could mean transition to a low, or no, carbon economy can become a reality. The world needs to slash carbon[...] dlvr.it/RtKZJp pic.twitter.com/cd8S3ijERl

    Room151 2 days ago

    Prudential code: “Not perfect, but its heart is in the right place”: The new Prudential Code offers revised rules for borrowing. Nikki Bishop is sceptical it will work while Gary Fielding offers his support. Nikki Bishop I have been asked to give[...] dlvr.it/RtKZFh pic.twitter.com/OriN28lXcb

    Room151 3 days ago

    Tremendous report from @MarkSandford3 citing @room_151 no fewer than six times (despite what the @lgcplus fact checking/counting dept might tell you) #localgov commonslibrary.parliament.uk/research-brief… 1/5

    Room151 1 week ago

    Dan Bates: Capitalisation directions are not the only tool for rebuilding finances: Dan Bates argues deep seated problems are contributing to a rush for capitalisation directions. For some time now we have been reading that a number of councils are in… dlvr.it/RspKff pic.twitter.com/xRRsgVim9u

    Room151 2 weeks ago

    Is local government funding “broken”?: Andrew Hardingham looks at the underlying issues that caused more than a third of respondents in the Room151/CCLA treasury survey to say that the funding system for local govenrment is[...] dlvr.it/RsYhsg pic.twitter.com/plNp7Ayys6

  • 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 Investment returns Vs principles: and the winner is…
  • Next story Introducing Agent 151: Is council tax thinking on the money?

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.