Tonight’s review committee was really quite the eye opener. Several items on the agenda led to a lengthy meeting and at times, a heated discussion took place.
No more so than the treasury management item on the agenda. Probably not the most exciting item as it really is about risk & reward, putting a bit of money here to gain a bit of money there. However, part of what we were asked to consider as a committee tonight were the options for intercouncil lending.
This is perhaps a topical issue due to the recent exposure of the finances in Northamptonshire County Council and that the media is reporting that this could be a taste of things to come for other councils.
So intercouncil lending is potentially ‘risky‘? How risky though? Cllr John Mason, having a background in the finance sector, probed our officers (and Cllr Simon Smith, portfolio holder) on this issue. This is where it gets interesting…… it was revealed that there is no way that a council can be checked for credit risk.
This is about risk and reward…. what’s the reward from intercouncil lending? 0.4% was banded about as an approximate figure. £3m is the max to be lent, what is the reward?
It seems a simple question but it was one that was met with an embarrassing and somewhat uneasy silence. Red faces from across the table as it seemed even with the aid of technology, an answer was not forthcoming.
Tempers flared as Cllr Mason repeated his call for a figure (a fair request) only to be accused of it being a ‘ploy’ by the portfolio holder- we’re not entirely sure what that meant!
The item was concluded with a vote as to whether this ‘strategy’ should agreed by committee and recommended to full council. Opposition members unanimously voted against intercouncil lending, all Conservative members of the committee thought otherwise!
If you haven’t worked it out yet if £3m was lent out it would yield a return of just £12,000 in a year. Is it worth the risk in this current climate? – you decide and let us know in the comments below.