Friday, October 10, 2008

WFDC and £9m

Our illustrious leader of the council made a televisual appearance on Central Tonight with regard to the £9 million we have invested in Icelandic banks. For those who missed it here's a transcript, I've refrained from adding in the few errs, ums, and minor repetitions.

04:50 - 07:12m
GO - Gareth Owen
JC - John Campion
JM - Joanne Malin

GO: We're in Stourport now. Joining us from the council offices is John Campion from Wyre Forest District Council. Now Mr Campion nine million pounds are you going to have to write this money off or will you try to get it back somehow?

JC: Absolutely not the first thing to say is that this money is not lost it's currently at risk following problems associated with three Icelandic banks so the money is not lost it's currently just at risk and we will be doing everything within our power lobbying the local government association and indeed the government to make sure we get that money back for our taxpayers.

JM: Okay, but it is a lot of money nine million. If you didn't get it back Mr Campion how much of the dent would that make in your budget?

JC: Well the investment represents about one third of our ongoing investment portfolio, but it is very simple to say we don't except [as per Don probably should be 'accept'] not getting it back as an option. We want to make sure that the government sticks by its pledge to protect UK investors and you have to look at it in the fact that we've got a hundred thousand people in Wyre Forest and nine million is their money.

GO: Okay it's obviously lots of worrying news today for taxpayers in your area, across the Midlands as well, they'll want to know tonight will they suffer if the worst happens and will we be left to pick up the bill?

JC: Wyre Forest is very much business as usual. We'll be making sure we continue to deliver the high quality services to our residents there will be no impact to our taxpayers and it will be business as usual and we will make sure that we manage this process to make sure that happens.

JM: Now I know out of the eight councils affected here in the Midlands Wyre Forest invested the most. Three times as much as say Solihull I know hindsight is a wonderful thing but why did you put so much in to Iceland?

JC: It's important to remember that this problem is associated with a quarter of the local authorities across the country taking advise to invest into gold plated organisations that these banks were. Obviously time has passed since then and their situation has dramatically worsened so today that situation is very different, but when we made the investment they were very much low risk they very much were organisations of good standing and they were seen by the country as a good investment. But of course hindsight's a fantastic thing and we've got to deal with it now

GO: Mr Campion we're out of time now thank you very much indeed for joining us from Stourport-on-Severn...

Let's fisk that. First off note the repetition that the money is not "lost" just "at risk", to put it another way the money isn't lost yet, but may or may not be at a future time. Next is the "we don't except not getting it back as an option" but one assumes that, as a responsible council, some contingency plans are in place should everything fall apart? There then follows the bit about expecting the government to sort it out - um and they'd be getting the money from where exactly?

"there will be no impact to our taxpayers" remember that when the council tax is increased, oh wait the increase will be due to a myriad of other reasons.

Okay first off I don't blame the Cllr Campion, I don't blame WFDC, I also find it difficult to blame the financial experts who recommended the banks. To be precise I can't blame them directly however I will query as to why British taxpayers money was being invested outside this country and outside the jurisdiction of our government. I can understand the need to spread the risk, but if every bank in the UK collapsed I think the last thing we'd be worried about is council services.

The second query which is cropping up a lot is the sheer amount of money that is being saved, however I think such people are being blinded by the noughts. Here Cllr. Campion states that £9m is only a third of the amount of the invested amount and taking the official 2007 population figure of 98.6k that means that full investment only represent approximately £273 per person.

The obvious thing is that this is a contingency fund, except the point of such a fund is that if a time arises that you need to access this money chances are you'll need to get at it rather quickly. Yet we hear that the reasons some councils (not necessarily WFDC) couldn't pull the money was that it was invested in long-term accounts.

I'm not one of those idiots who claim that all this palaver is a good thing, but I will say it will, or at least should, lead to a shake-up in procedures and conceptions.


Don B said...

I take it that JC was so befuddled that he meant "accept" except he could be confused by losing one third of WFDC's short term reserves and decide not to pay one third of the wages to the council workers this month

Anonymous said...

I take it his answers were written by John Prescott! What a lot of tosh he said. Can we have a leader who speaks English please.

FlipC said...

Could have been either from the broadcast Don, from context you're probably right and I should have typed it as "accept"; amusing slip on my part though ;-)

Anonymous said...

I think you are being fairly kind to the council's financial advisors/employees.

It has been reported that a number of councils (Brighton for certain), withdrew all investments from Icelandic banks a few months ago on the advice of their finance boys who said it was too risky.

It seems that some officials were failing their employers (us) by following the sheep into these high-interest accounts.


FlipC said...

I'll happily assign blame where it's due, is this case there really is a lack of specific targets.

The difficulty lies in exactly what type of investment was made. It may well be for a long-term account the penalties for withdrawing the funds early would exceed that of the return to date, thus resulting in a loss of money which would look negligent if everything had stayed hunky-dory. Hindsight being a wonderful thing.

I'm willing to extend the benefit of the doubt that the council invested these funds at a time when the banks had an excellent credit rating.

As for being sheep it's the government's own rules that stipulate the spread of investments and that they should be as high a return as possible dependent on the credit rating.

What I have made mention of is the fact that such investments were deposited outside the country and in fixed-term accounts. Again I hope this causes a investigation into the rules and how they're interpreted.

Anonymous said...

I'm doing a bit of research into this and then all of a sudden 'Bert' comes along with this bombshell: Excessive’ council tax rise warning!