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Council give details on £11m inter-authority loans “We receive interest on these loans, and gain an income as a result”

NOTE: This content is old - Published: Tuesday, Dec 18th, 2018.

Wrexham Council have explained how their short term loans are used to ‘manage cash-flow’ and ‘gain an income as a result’.

Yesterday we wrote how North Wales councils were loaning £366m to other local authorities at ‘bargain basement interest rates’ with claims made the system was ‘propping each other up’ (article here), we also noted how our questions had been acknowledged but ignored.

We spotted Flintshire Council tweeting about their financial woes yesterday afternoon, so posed a similar question to them and had a prompt reply.

Shortly after Deeside.com managed to get further detailed from Flintshire Council which noted they had generated £126,000 via the loaning activities, and explained the context of their loans.

In Wrexham the opposition councillor Marc Jones tweeted his understanding of the loans, adding: “Transparency in council finances would help dispel a lot of myths and misconceptions. Not answering media questions just looks evasive.”

Finally around 5pm we had an unsolicited further reply to our initially query from Sunday night, that asked for comment on the figures and claims and asked for details on the returns made on the loans issued, and information over what period the loans were made.

As the claim were such loans were ‘propping up’ other authorities, had also enquired which other local authorities benefited from Wrexham Council cash.

In the statement Mark Owen, Head of Finance at Wrexham Council said: “As a local authority, we spend more than £300m per year, funded by the money we receive from governments, Council Tax and other sources of income – much of which does not come in at the same rate at which it needs to be spent.

“All authorities have a Treasury Management Policy, which details what we can and cannot do with the funds we receive, and the balance we need to hold between security, liquidity and yield.

“Our policy allows us to loan to banks, building societies, the government debt management office and other local authorities, and that lending would only be for a number of days at a time. We receive interest on these loans, and gain an income as a result.

“This facility is purely used to manage cash-flow – in the last five years, the Council has loaned £11m, for short-term periods, to ensure we receive more income. That money had not yet been earmarked for service use, and as such we felt it preferable to generate a return on it, rather than leaving it unused.”

Yesterday lunchtime saw councillors who read Wrexham.com raise the issue in Scrutiny over the inter-authority loaning, with a request for a ‘mechanism’ for the profits to be diverted and ring-fenced for the council’s education department (webcast point here). The Finance Officer explained that Wrexham was ‘one of the lowest’ in providing short term loans to other councils, describing the loans as ‘treasury management’.

Speaking in layman terms it was explained a large dollop of cash comes in to Wrexham Council from Welsh Government, “We don’t need the money for a couple of days so we will either put it in the bank, or in the government or ask if any authority has the opposite position and wants that for a couple of days and pays it back to us” noting it is not that useful for adding to budgets as was requested in the committee meeting, but more a recognition that ‘cash flow is not even’.

You can view the officer explanation on the meeting webcast here.

We did reply to Wrexham Council and ask why the no comment eventually turned into a comment, however have had no comment.

 

 



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