Fire service satisfied with investing in councils

Shropshire and Wrekin Fire Authority has £12 million invested in six English councils and £9.8 million more in banks and building societies.

Strategy and Resources Committee chairman Chris Mellings pointed out that Thurrock Council holds £2 million of the authority’s money but has been criticised for its financial strategy which has seen it borrow approximately £1 billion from a range of public bodies.

Head of Finance Joanne Coadey said treasury advisers were “well aware of the issues” at the Essex authority, but saw it and councils like it as “a safe investment and a safe place to put our money”.

Cllr Mellings said: “During last year there were concerns picked up in the national press – there was an article in the Financial Times in the summer – about Thurrock’s investment strategy and the fact that they borrowed something like £1 billion from other local authorities to fund commercial investments.”

That report, published by the newspaper in May 2020, said the council had borrowed the money to invest in areas including green technology and renewable energy with a view to improving its own financial situation, and included criticism of the approach.

At the time it was published, deputy leader and finance portfolio holder Shane Hebb defended the strategy, saying the investment approach had built up the borough’s reserves by 40 per cent in four years.

At this week’s fire authority committee meeting, Cllr Mellings asked: “I just wondered if we’re satisfied there is no risk to us. I know it’s a local authority and in theory they can’t go bust, but, obviously, a number have experienced financial difficulties.”

He also asked what would happen to the fire authority’s money if it was invested in any council that then issued a Section 114 notice – councils’ way of effectively declaring bankruptcy and banning all non-essential spending.

Ms Coadey said: “We have asked some questions of Treasury Services about the appropriacy of lending to Thurrock.

“Treasury Services and their advisors view councils like Thurrock as a safe investment and a safe place to put our money.

“If, however, a Section 114 notice is issued on a council which meant they were unable to fulfil their responsibilities in terms of budget, that would be reviewed and they would be removed from the counterparty list.

“They are well aware of the issues but happy at the moment that it doesn’t represent a risk to the authority.”

A report by Ms Coadey and treasurer James Walton said the fire authority has £12 million split between six councils. A further £8.8 million is divided between five banks and £1 more is in Coventry Building Society.

“The interest on investments earned to the end of December is £70,439 – an average rate of return of 0.4 per cent,” Ms Coadey and Mr Walton wrote.