THURROCK Council may have to change its controversial borrowing strategies again a parliamentary watchdog responded to a move by the Chartered Institute of Public Finance and Accountancy (CIPFA) which is concerned about the way councils are playing the money markets.

After being stung with a couple of investments that have soured, Thurrock Council has already downsized its borrowing to invest strategy which at one point saw it in debt by more than £1 billion pounds and courting national concern following a story broken by Thurrock Nub News in January 2020.

The council's strategy, led by senior financial officer Sean Clark, saw it owing more than £1.4 billion at one point.

Last month the council announced that because of pressures and difficulty in borrowing more money, it was changing its plans and aimed to reduce its debt by more than £350.

That may still not be enough as the policy of councils borrowing to make cash is under increasing scrutiny.

CIPFA has launched a consultation on proposed changes to its [L] https://www.cipfa.org/policy-and-guidance/publications/t/the-prudential-code-for-capital-finance-in-local-authorities-2017-edition-book [L+]Prudential Code in order to strengthen provisions restricting borrowing for yield.

Currently, the code states that "authorities must not borrow more than or in advance of their needs purely in order to profit from the investment of the extra sums borrowed".

However, CIPFA proposes strengthening the wording, because it says borrowing to produce a yield does not constitute the primary purpose of council investment and represents unnecessary risk to public funds.

CIPFA chief executive Rob Whiteman said: "A minority of councils are currently misinterpreting or not having regard to the current provisions of the Prudential Code.

"If this trend continues without strengthened provisions, local authorities risk further government intervention into the Prudential Framework."

Strengthening the Prudential Code will ensure local authorities are protected from unnecessary risk and "reduce the threat to the existing principles-based system", he added.

CIPFA also proposes that any commercial investment must be is 'proportionate' to revenue budgets and consistent with treasury management practice. The updated code would also strengthen requirements to assess the affordability of commercial activity within local authorities' capital strategies.

Meg Hillier, chair of Parliament's Public Accounts Committee, said: "The Public Accounts Committee has been concerned about how some councils are investing in risky portfolios for commercial benefits.

"It is good that there is now a consultation about the Prudential Code.

"Councils are responsible for their own actions but when failures can have a huge impact on service users and taxpayers it is time to revisit the guidance and void some of the worst failures."

Also see:

Questions about diligence after council pays out £5 million in commission to entrepreneur

Detailed probe into council cash plan

[l} https://thurrock.nub.news/n/media-coverage-has-not-helped-council39s-financial-position-says-thurrock39s-financial-guru-who-has-borrowed-hundreds-of-millions [:+]Media blamed for council's cash strife[.L]

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