What has surprised me most about the story of local authority reserves and the Icelandic banks is the degree of criticism of councils.
I heard Nicky Campbell on Radio 5Live going on and on at a representative from the Local Government Association about this (to be fair Campbell goes on and on whatever the topic and really needs to find that off switch).
Then the leader of Somerset County Council was on the drive programme and was asked why so much money was in these banks. She explained that it's only about 2.5% of their total, so not all their eggs were in one basket. The follow up was a surprised: "What are you doing with so much money?"
Wiltshire County Council, which put £8m just three months ago (whoops) into a subsidiary of an Icelandic bank, emailed all staff to explain: "The council invested with Heritable which was a reputable bank with a strong credit rating as part of the council’s policy to optimise investment income while ensuring security by investing in strongly-rated banks."
It went on to say: "At any one time, the County Council, like all Local Authorities, has money it is holding to use for forthcoming activities. This money is invested until it is needed to ensure we get the best possible income for the people in Wiltshire."
Which is the reasonable position adopted by many other councils.
As for the huge sums overall - isn't it obvious that, for example, local government being such a huge employer will also have gigantic pension responsibilities?
Yet relatives of council employees report being quizzed in the last few days about why councils have all this money and why don't they put it in to UK banks?
Local government finance is about as comprehensible as a plan for a nuclear power station written in cuniform. The situation is not helped by generally poor explanations from either central or local government which are keen to blame cuts on the other party and credit investment to themselves.
This latest crisis has highlighted the lack of public (and journalistic) knowledge there is about council finances.
And if you don't know where the money is going to and from, then are you really making informed choices when it comes to voting?
Comments
Guthrum / October 12 2008 2:48pm
Considering that 20% is spent on LA pensions, this uberclass need to be taken to task over this, north somerset have emailed me to say that £3m down the drain is not a lot in the overall schem of things !
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