Northumberland County Council to move money into foreign banks

Posted by The Journal on May 14, 09 11:35 AM in Councils

Spending bosses at Northumberland Council are to be given permission to move ÃÂ£141m into foreign banks instead of using the money to safeguard jobs or lower council tax.

Officers at the council have told their Liberal Democrat bosses they effectively have more money than they know what to do with and, instead of spending it in the county during the recession, they have searched the globe seeking bank deals to invest in.

At the same time council leaders have been forced to cut more than 400 jobs and scrap 300 vacant posts as they struggle to find cuts needed to meet Government spending targets.

Tax bills will also rise by 3.8%, with further increases still to come, as officers increasingly look to residents for extra cash.

Last night the council insisted it had a duty to keep money in reserve, although it did not say what percentage of its current surplus had to be placed in the banks.

Labour group leader Grant Davey said his party had already urged the council to drop plans for bumper savings accounts when they put together an alternative budget earlier this year.

A Labour group recommendation to spend some of the reserves on retaining and creating jobs in Northumberland was not taken up by the council.

Mr Davey said: "We said then that if we had this extra cash coming our way it would be better spent in the region than in being placed in foreign banks.

"We need our reserves and they are an important part of council finances, but with interest rates as low as they are it makes little sense to build them up with no gain while we face job losses here.

"There is no need to currently build up such a large reserve when instead we could be reviving the county's economy at the very least through the retention of council jobs."

Of the ÃÂ£141m funds, ÃÂ£68m is money already borrowed for future building projects. Officers say the rest of the cash is divided into different pots.

Many North authorities have taken an alternative approach to council investments. Record low interest rates have seen an end to the favourite banking policy which involved placing millions of pounds in UK banks and living off the interest.

Instead many treasury officers are looking to pay off debt to prepare for growth once the recession ends.

Conservative group leader Peter Jackson has asked officers for assurances that debts were being repaid during the downturn, and said he believed loans which could be repaid without a penalty being imposed had being looked at.

Mr Jackson said the council would feel as if it had little choice but to place money in foreign banks.

Last night a council spokeswoman said much of the funds going to foreign banks were allocated in a way which prevented them from being spent immediately.

"The council agreed at the last full council meeting to reduce the amount of money going into the general fund, and the investments reflect that."

The spokeswoman added that some of the money was already earmarked for schemes such as winter weather insurance, as well as other cash "ring-fenced" for Government-backed projects.

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