Kent County Council to go back into money markets
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by political editor
Paul Francis
Kent County Council is to move back into the money markets but
will not be investing taxpayers’ money in foreign banks - at least
for the time being.
The authority has been placing all new investments with the
Treasury since it emerged a year ago it had £50million at risk in
three Icelandic banks.
However, that has proved costly because while the Government's
Debt Management Office (DMO) is seen as a safer haven for
taxpayers’ cash, it offers significantly lower rates of interest on
deposits.
Now KCC is to return to making deposits with UK-based high
street banks offering more competitive rates of interest. Among
five banks the council has agreed to invest in are HBOS and the
Royal Bank of Scotland, both of which were baled out by the
Government with signficant injections of cash.
Cllr John Simmonds
(Con), KCC's cabinet member for finance, said the council was
adopting a more cautious strategy, incorporating recommendations in
an independent audit report the authority commissioned following
the banks' collapse.
He said: "We are only [agreeing] to make deposits with
institutions that are of such signficance that the Government would
not allow them to fail. These deposits are not guaranteed but, as
we have seen from events with RBS and HBOS, they are significant
parts of the banking system.
"Given they have the same security as the Debt Management
Office, it would be a waste of public resources if we did not avail
ourselves of that."
He did not rule out the possibility of making future investments
in foreign banks in the future.
KCC finance director Lynda McMullan said better rates being offered
by some of the banks meant the council could be some £800,000
better off over a year, even though interest rates remained
low.
"There are significant gains to be made and we do not see it as
adding signficant risk," she said.
The five banks KCC has agreed it may deposit money with are all
effectively backed by the Government through the Credit Guarantee
Scheme.
Opposition Lib Dem spokesman Cllr Tim Prater said: "As long as
KCC is investing in blue chip government-backed banks that people
in Kent know and use, I do not think it is a problem. Frankly, it
is in the best interests to get extra money through interest but it
has to be tightly controlled."
Wednesday, October 14 2009
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