Investments bringing in less cash for the council (From Worcester News)

Investments bringing in less cash for the council

2:30pm Saturday 21st July 2012 in News By Tom Edwards

MORE than £50 million has been invested by Worcester City Council on the money markets in the last year, bringing in an extra £173,000.

But the average rate of return has plunged in recent years – as recently as 2008, the council made £727,000 profit from the scheme.

The interest payments on £50.8 million of cash borrowed to other bodies left the authority with £173,254 of extra money in 2011/12.

The return rates from the investments averaged just 1.1 per cent, compared with more than five per cent four years ago.

The findings are contained in a report discussed by the council cabinet at a meeting.

Councillor Simon Geraghty, city council leader, said he was not prepared to take risks with taxpayers’ money.

He said: “When things do go wrong with investments, people always ask questions as to who made what decision when, and how sound those decisions were. We aim to take a realistic and proportionate view to make sure our money is protected.”

After the meeting, Coun Andy Roberts , cabinet member for finance, said: “There was a time when district councils were more speculative – some of them came unstuck when they invested in the Icelandic banks, for example.

“But we are in special times and we can’t take any risks.”

Coun Richard Boorn, Labour’s finance spokesman, said: “When you’ve got money sitting around, it’s the right thing to invest it. I think it’s a good strategy.

“I do think we could have got a better rate of return on the 1.1 per cent but the problem at the moment is that you can’t get a good one.”

Every year, finance bosses draw up a strategy for lending money and use money-market brokers to secure the best rates of return.

The council uses cash coming in on a regular basis, such as business rate collection and council tax income, in order to fund it.

They avoid leaving it in ISA accounts because historically, they tend to get better rates of return by moving money around in multiple short-term investments.

More than £1.4 million has been cut from the budget over the last two years and bosses are trimming at least another £850,000 by 2016.

The extra money is likely to go into the council’s general revenue budget.