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Authority ‘could lose out on £300k  a year’ in possible returned investment after tightening the way it loans money

The West Midlands Combined Authority (WMCA) ‘could lose out on £300k  a year’ in possible returned investment after tightening the way it loans money, it has been claimed.


The changes have come after a media story caused a storm among members who were concerned about £15 million in loans to bankrupt Woking Borough Council.

The loans were agreed after the local authority revealed in February it was in “Section 114 territory” and nearing bankruptcy.

Woking BC officially announced it could no longer balance its own books on June 7 and the Local Government Chronicle uncovered £40m of loans to the council in August – including three £5m deposits from the WMCA.

But WMCA finance director Linda Horne heavily emphasised the low-risk nature of such loans as she set the record straight at a meeting of the WMCA Overview and Scrutiny committee yesterday, Tuesday September 5.

“This is not money that was available to invest; this was essentially surplus cash deposits that we hold in various institutions until we need the cash,” she said.

She explained that money issued to the WMCA in advance, such as government grants, are deposited where it can grow until the time comes to spend it.

She added that accusations of “reckless” spending in the press had been “upsetting” and asked members to seek guidance before commenting publicly on financial matters.

She also revealed she has taken further steps to tighten processes and reduce risk – but said this will cost the WMCA £300k in possible returned investment annually.

The steps include reducing the length of time officers can make forward deals – a type of customised contract – with local authorities from six-to-eight months down to one month.

Her team will also not make agreements with local authorities which have stated publically they are facing financial difficulties.

Ms Horne admitted that while she was assured of the safety of such loans, with unprecedented numbers of councils facing bankruptcy, she would be seeking advice from the  Chartered Institute of Public Finance and Accountancy (CIPFA).

She also revealed that the WMCA is considering loaning £25m to Birmingham City Council but wanted to avoid similar criticisms in the press.

Birmingham Conservatives Deputy Leader Ewan Mackey (Roughley) asked why the decision to tighten processes had been taken given the loans were safe.

WMCA Chief Executive Chief Executive Laura Shoaf responded: “We haven’t in my experience been in a situation where so many local authorities are either on the edge of, or are trailing in the press that they are near to, issuing a 114.

“It is something I will keep an eye on to make sure but bringing the time frame in closer just gives us that additional certainty about where we are putting out those loans.”

She added she had taken the decision after having constituent members questioning the “professional judgement” of WMCA staff in the media.

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