Wigan council leader backs investments in other local authorities

Council leader David MolyneuxCouncil leader David Molyneux
Council leader David Molyneux
Wigan's council leader has defended the practice of investing funds with other local authorities after it was called into question by opposition councillors.

Coun David Molyneux said the town hall gets a “very good return” on the short-term agreements and highlighted that the council has passed recent independent audits “with flying colours”.

Independent pair Councillors Bob Brierley and Paul Maiden queried whether the council was losing out because of low rates of interest.

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The issue was raised as part of a discussion on the town hall’s treasury management annual review at the latest meeting of the full council.

Coun Brierley said figures show the authority issued loans with a cumulative total of £73m to other councils in the last financial year, with a return of £161,000.

Officers have clarified the interest the council received was £317,000, not £161,000, during 2017/18.

The investment deals ranged from five to 181 days with interest rates of 0.25 to 0.9pc.

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Coun Maiden, who represents Hindley Green, said: “Can I just point out that we’re lending money out at less than the base rate of the bank, that’s 0.5pc?

“We’re lending loans out here at 0.4pc, the rate of inflation is 2.3.

“If we don’t have a base rate of loans over the rate of inflation, we’re losing money on that.”

Coun Nazia Rehman, cabinet member for resources, finance and transformation, said because of the short-term nature of the investments, basic rate “does not come into the equation.”

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She told the chamber: “If we charged at the same as base rate, local authorities would just go elsewhere.

“This is not lending: this is investing for very short periods of time.”

Coun Rehman had earlier said: “The idea of treasury management is to place as much money as we can with other institutions other than banks to keep our bank charges at a minimum.

“We have a lending list of secure banks and other institutions that we can place our money with, this includes other councils.”

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Coun David Molyneux said: “I think Coun Rehman has answered the questions put to her very clearly. When you consider some of this money we lend is there for a couple of days, we get a very good return on it.

“We’ve been through audit after audit from outside auditors and still come out with flying colours. It justifies that the actions we take as a local authority to be the right ones, and this has gone on for a number of years.

“If you ask some of the authorities in Greater Manchester in particular, would they swap us the books we have and the finances we have, they would say yes, because Wigan continuously gets it right.”

The report, which was approved by the chamber, said: “No institutions in which investments were made during the year had any difficulty in repaying investments and interest in full during the year.”

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It added that the interest received by the council totalled £317,000. This was £161,000 more than the seven-day London Inter Bank Bid Rate (Libid) which is used as a performance benchmark.

The Wigan Post recently revealed that another of Wigan Council’s investments had earned it a very healthy return. As a part-owner of Manchester Airport Group, the local authority earned a £4.8m dividend as the business continued to boom during the last financial year.

Manchester saw 27.9m passengers pass through its doors over a 12-month period: a rise of 6.5 per per cent on the previous year. Across the group passenger numbers increased to 58.9 million. The results for the year to March saw revenue increase 9.8 per cent to £814.3m.