Consultation clears the way for MMF investment by Welsh councils
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Photo (cropped): Matthew Wilkinson, Flickr, CC By ND 2.0
Investment in money market funds (MMFs) could become easier for Welsh councils under new proposals to bring local government finance rules into line with England.
The Welsh Government has launched a consultation on amending 2003 legislation governing capital finance and accounting.
An exemption will be introduced—already in place for English councils—from the Capital Finance Regulations which class the purchase of shares as capital expenditure and profits from their sale as a capital receipt.
The consultation said: “This will limit the risks associated with investments of share capital by being spread across a number of companies. This will ensure local authorities in Wales are placed on an equal footing with their English counterparts and have clarity that they are permitted to invest in money market funds, Real Estate Investment Trusts and local authority investment schemes approved by treasury without incurring capital expenditure.”
Restrictions on using MMFs were removed in England and Wales in 2002, but reintroduced in Wales in 2004.
Robert Hay, deputy director within the local government finance policy division of the Welsh Government, told Room151: “The proposed changes reflect our discussions with our stakeholders. They also reflect developments in other legislation and practices which have prompted a need to review the regulations.”
David Green, client director at treasury adviser Arlingclose, said: “We fully support the reintroduction of money market funds for Welsh local authorities.
“We believe they offer improved security, liquidity and yield over traditional bank deposits, and are therefore fully in line with the Welsh Government’s investment guidance.”
Other changes outlined in the consultation include a change that means councils will not incur capital expenditure if they lend to individual companies by means of corporate bonds.
Among the updates to outdated terminology, the draft regulations replace the term “fixed asset” with “non-current asset which is not a financial asset”.
In a separate consultation launched this week, the Welsh Government announced its intention to reform its business rates appeals system.
Mark Drakeford, cabinet secretary for finance and local government, said: “I am aware of the concerns that have been raised about the reform of the appeals process in England and the introduction of the Check, Challenge, Appeals (CCA) approach there. It is not the Welsh Government’s intention simply to adopt that approach.”
But John Webber, head of business rating at property consultancy Colliers International, said: “It’s alarming. The Welsh Government claims it wants the appeals system to be ‘improved and tailored to better meet the needs of Wales’ but it does not seem to have learnt from the mess that’s been created by the CCA process in England, and one wonders if the true motive is helping businesses or just making its own life easier by making it virtually impossible to appeal against an unfair valuation.”
