HARD-UP COUNCILS LEND £366M TO PROP UP OTHER UK TOWN HALLS
NORTH Wales’ cash-strapped councils have been ‘propping up’ other authorities with up to £366m of loans at rock-bottom interest rates.
Figures obtained following Freedom of Information requests by sister paper the Daily Post reveal the authorities have loaned millions of pounds over the last few years to other councils around the UK.
They say the risk to their money is small, but critics said they shouldn’t be using local taxpayers’ cash to help out other town halls.
The returns on some of the loans have been as low as 0.15%. Gwynedd council loaned out £91m over the last five years, but only made a profit of £128,000 on it.
The Taxpayers Alliance, says councils should focus on delivering key services.
According to the figures, Ceredigion accounts for almost a third of the total, having loaned out £109m since 2013 – with recipients paying back on interest rates as low as 0.15%. Over the same period, Gwynedd loaned out £92m with Flintshire lending £57.3m.
But due to the low interest rates – all well below 1% – authorities have only made a relatively modest profit.
According to a Ceredigion council spokesperson, the loans policy plays a major role as part of its treasury management strategy.
He said: “Ceredigion County Council has a gross revenue budget of over £200m and, therefore, has significant cashflows to manage at any given point in time during the course of a year.
“The council’s underlying investment priorities are the security of capital and liquidity; therefore, placing fixed-term deposits with other Local Authorities is consistent with those principles and forms just one element of the council’s Treasury Management Strategy.”
But Duncan Simpson, research analyst at the TaxPayers’ Alliance, said: “Local authorities should not be engaged in propping up each other. Rather, they should focus on delivering their statutory duties.
“Whilst these loan rates seem appealing, taxpayers all over the country could be left even further out of pocket if they’re not repaid.”
A Gwynedd council spokesperson added that the authority had to adhere to Welsh Government guidance in regards to the security of its financial investments which help bolster the pension fund it operates on behalf of Anglesey and Conwy councils.
He said: “In March 2011, Gwynedd council adopted rules which require the authority to approve a treasury management strategy before the start of each financial year.
“Both this code and Welsh Government Guidance require the authority to invest its funds prudently, and to have regard to the security and liquidity of its investments before seeking the highest rate of return, or yield.
“Gwynedd council’s Treasury Management Strategy, which is approved by the full council every year, allows the Council to invest money with local authorities as the risk of insolvency is insignificant.
“In accordance with this strategy, when it has funds available for a short period, the council deposits sums of money in banks and with other parties including a series of short-term loans to other local authorities, with a typical repayment period of one, three or six months.
“The sums noted in the Freedom of Information request for Gwynedd council includes money invested by the council on behalf of the Gwynedd Pension Fund. This fund incorporates Gwynedd council, Conwy council and the Isle of Anglesey council as well as approximately 40 other employers”.
Anglesey loaned out £15m and Wrexham loaned £11m.
CEREDIGION loaned a total of £109.1m since 2013, while Gwynedd, which only started lending in 2015, has let other UK town halls borrow £91m. Flintshire council has given loans ranging from £4m to £17.8m over the last five years. Conwy council put £55m out to other authorities, while Denbighshire has allowed other councils to borrow £26.8m of its cash. Anglesey council loaned out £15m in 2015/16. And Wrexham council has loaned a total of £11m of its money.