27 September 2002
In consultation with the Debt Management Office, a Treasury offshoot, Raynsford has expanded the Debt Management Account Deposit Facility. This allows councils to place surplus cash with the triple-A rated Treasury department in return for a 'market-linked' guaranteed rate of interest.
The DMADF has operated as a pilot scheme for 50 councils, and Raynsford wants to see that number trebled in the next year.
'In December's white paper, Strong local leadership – quality public services, we promised to give councils greater choice in how they could invest surplus cash to generate safe and generous returns,' Raynsford said.
'I am pleased to report that the facility is being moved to a longer-term basis and being opened up to allow more councils to benefit.'
Under the expanded scheme, the DMO has extended the maximum maturity of deposits from three to six months. The minimum transaction size has also been reduced from £1m to £250,000 to compete with short-term bank lending.
Some council finance experts, however, believe that the new scheme is unlikely to be as popular as bank cash deposits, because it does not offer higher interest rates.
But Jim Juffs, head of operations at the DMO, said: 'That's not really the point of the system. The interest rate we offer on deposits is competitive and depositors have the additional security of a triple-A rated institution dealing with their cash.'
PFsep2002
