Councils' treasury management flaws 'not fully resolved'

21 Oct 10
Councils' treasury management is 'improving', but problems highlighted by the Icelandic banks fiasco have not yet been fully resolved, according to the chair of the communities and local government select committee

By Jaimie Kaffash

22 October 2010

Councils’ treasury management is ‘improving’, but problems highlighted by the Icelandic banks fiasco have not yet been fully resolved, according to the chair of the communities and local government select committee.

The committee reported on treasury management in councils in June 2009, after the Icelandic banks collapse. An estimated £1bn of UK local authority deposits were put at risk by the fall. The committee’s inquiry had ‘exposed a degree of misunderstanding and complacency on the part of some crucial players’, including councils, the report said.

Clive Betts, speaking at CIPFA’s annual treasury management conference in London yesterday, said the committee – which he was a member of during the previous Parliament – had been ‘shocked’ at the role of professional treasury management advisers. He said they had ‘not provided advice, but information that could be found in the Financial Times’.

But he said ‘improvements had been made’ since the report came out. He also welcomed the publication of the CIPFA treasury management code.

However, the committee’s concerns about advisers’ potential conflicts of interest had not been resolved, he said. The previous government had been taking steps to improve regulation and Betts called on the current administration to continue this.

He said councils should be encouraged to pay off debts to the government-run Public Works Loan Board as in some cases, these loans accrue as much interest as councils make from investing. But there are still early payment fines in place, an issue which is not being addressed and is preventing councils from saving money through this ‘no-risk’ strategy, he added.    

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