Responses to local authority investments report

28 October 2009

The Communities and Local Government Committee today publishes the responses to its report earlier this year on local authority investments

That earlier report examined the framework for the investment of local authority reserves, following the potential loss last year of up to £1bn of local authority cash in the failed Icelandic banks.

The Committee invited responses to its report from the Department for Communities and Local Government, the Audit Commission, the Chartered Institute of Public Finance and Accountancy (CIPFA), and the Financial Services Authority (FSA).

Commenting on the responses, Dr Phyllis Starkey MP, Chairman of the Committee, says:

"We are pleased by how the main central players in local authority treasury management have responded to the issues raised by our report.

"Improved advice and guidance is now being made available to local authorities about their investment practices, and steps have been taken to ensure that there is appropriate coordination and cooperation between those who carry out responsibility for monitoring local authority treasury management activities.

"However, we are still worried about the regulation of local authority treasury management advisers. The FSA’s response to our report seems to suggest that their activities in relation to local authorities are effectively unregulated. This contradicts the impression given by marketing and other material produced by these firms to promote the services they offer.

"The FSA has also declined to follow up our concerns about potential conflicts of interest in some of these firms. Given the sums of public money involved, these remain matters of some concern to us. We are pursuing these issues with vigour with the FSA."

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