Government set to free up council investments

31 Jan 02
Local authorities will finally be given powers to invest in money market funds in a shake-up to be announced by ministers shortly.

01 February 2002

Public Finance has obtained a copy of the draft statutory instrument, currently subject to final consultations. This will be laid before Parliament by local government minister Nick Raynsford in time for the changes to come into force at the start of the 2002/03 financial year.

The move represents a major step forward for local authorities, which have long been campaigning for more freedom to manage their own finances. It means that councils can, for the first time, speculate on the money markets and maximise returns on spare cash.

A consultation paper on investments, produced by the Department for Transport, Local Government and the Regions, was sent to local authorities before Christmas. It had indicated that access to MMFs would be delayed, so there was surprise in local government circles that the reform is now back on track.

Martin Easton, capital policy adviser for the Local Government Association, said local authorities would welcome the change.

'MMFs have the benefit of very good credit quality with the ability to take in smaller sums of money. They represent a very safe place for public money to go,' he said. 'If the department now felt able to go straight ahead with MMFs, the LGA would be delighted.'

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