If there was ever a reason for voting out Gordon Brown it is the state of the economy. However, if there was ever a reason for not voting the Tories in it is the same one.
For, who is the man who the Tories trust as their party treasurer and chief fundraiser? Why, Mr Michael Spencer, the Chief Executive of the two companies that supplies Wyre Forest’s credit rating service and brokered the Wyre Forest Council £9 million investment deal with the Icelandic banks.
On the 11th June, the Independent newspaper said, “The Communities Select Committee say in a scathing report that the Financial Services Agency (FSA) should investigate whether it is appropriate for one part of Mr Spencer’s ICAP empire to assist council finance officers with council investments while another part receives fees for brokering the deals. This could give rise to “actual or perceived conflicts of interest”, it said.”
In all, 51 councils accepted Butlers’ credit rating services and invested £470 million in Iceland. Of them, 16 percent, including Wyre Forest DC, also took on the services of ICAP to broker the deals.
Though Butlers insist they are “segregated” from ICAP, Wyre Forest’s Treasury Management Review Panel report of February 19th says the Butlers representatives called themselves the “go between” for WFDC and ICAP. The report makes interesting reading. You can find the link on http://www.wyreforest.gov.uk/council/docs/doc39536_20090219_cabinet_report.pdf
The rather restrained document exonerates Wyre Forest’s own financial officers, largely because they weren’t qualified enough to be responsible, with the council relying instead on Butlers. In return, Butlers says it is only a credit rating agency and offered Wyre Forest no investment advice.
If this sounds like buck-passing, the government Select Committee report puts it this way…”Responsibility for local authorities’ investment decisions lies, and must lie, with the local authorities themselves. However, the claim by some treasury management advisers that they give information only, not advice, on investment counterparty creditworthiness is, in our view, misleading.”
What is not misleading is that while Wyre Forest’s residents are £9 million out of pocket, ICAP, Butlers and Michael Spencer are not and Butlers continues to be under contract to Wyre Forest until September 2010.
So, there’s Tory financial management for you. I know that as a Lib Dem I’m biased, but even the Mail on Sunday, The Observer and former Tory chancellor, Nigel Lawson seem to think Vince Cable MP is a better man to revive our economy than George “Flipper” Osborne. Flipper’s chums in the banking industry might disagree but who are they to judge?
Neville Farmer
June 17, 2009 at 9:25 pm
Gosh, Lib Dem PPC saying don’t vote for the Government, and don’t vote for the opposition (ie the Tories) and who should they vote for . . . . . . oh yes that’s right, those bastions of common sense, those very Liberal sandal wearing Democrats who will save the day with their decisive decision making and leadership. I am sure a right minded reader wouldn’t see this as a blatant partisan pollicisation of the truth.
What has it go to do with anything that the Tory party treasurer is the same man who is CEO of Butlers and ICAP? You cheaply try to imply wrong doing and collusion where none exists.
Butlers collate and relay credit ratings, they don’t actually rate organisations, that is done by three companies that are recognised around the world. They also don’t say, “invest in this company”. What they do is apply the Councils Treasury Management Policy to the Market, which creates the Council Lending list, ie those companies which meet out policy and we are able to lend to. To suggest otherwise either means you don’t understand or you are trying to mis direct. ICAP merely let the deal.
The Treasury Management review was lead by the Leader of the Opposition, and was co authored by a member of your own Party. Neither of which have a record of rushing to my political rescue. The report is balanced and accurate.
On Bulters contract with the Council, what are you suggesting? That we just break our contract? End up in court? Can you prove they have done something wrong? No you cant, you are just trying a cheap innuendo of wrong doing and mis management.
On the £9m, who says we have lost the money. On the WORST estimates we will get back a minimum of 80p to 90p in the pound from KSF and Heritable. This demonstrates the strength of those companies which were forced into administration by the over reaction of others.
One thing that always sooths my furrowed brow over your partisan and somewhat bonkers ranting, is that I have enough faith in the electorate to have confidence that they will never trust you or your party to run this County or represent Wyre Forest at Westminster, so Neville you rant on . . . . . . .
June 17, 2009 at 10:03 pm
I’m sure a “right-minded reader” would notice that I’m partisan, John, because I said I was in the article. I assume you mention it because you believe you are not?
Now that you’ve opened a discussion on this subject…
Who suggested that you employ ICAP to broker the investment of Wyre Forest’s money in the Icelandic banks and was the brokerage deal put out to tender?
Why did you not employ proper financial consultants over such an important matter if your own financial officers were not qualified for that level of decision-making?
If you used three credit rating companies to keep you informed through Butlers, why was the council unaware that the banks’ credit ratings were downgraded months before they crashed?
If the connection between Michael Spencer’s companies is irrelevant, why has a cross-party parliamentary committee asked the FSA to look into potential or perceived conflicts of interest between Butlers and ICAP?
Why did you sign a contract with Butlers that you could not get out of if they let you and Wyre Forest’s residents down?
Can you guarantee that at least 80 pence in the pound will be returned from Iceland?
If so, when?
and…
Why do you think that’s good enough?
I’m sure a right-minded reader will soon be able to tell who from the above is either bonkers or ranting.
Neville Farmer
June 17, 2009 at 10:25 pm
No one suggested we employ ICAP to broker WFs invest in Iceland. The three banks were on the counter party list at the time of investment, met the Councils policy, and so the deal was let. They weren’t recommended by anyone.
We employ a treasury management company to apply councils policy to create a counter party list, to which Council officers can then let deals too.
At the time the Deals were let, the Banks in question all met the Councils critera in term the ratings across the three ratings agencies. They were down graded as the term of the deal was coming to an end, there was not an option to “get our money back early”. If you knew anything about the commercial money market you would know this.
The connection between ICAP and Butlers is irrelevant because Butlers are not recommending companies for us to trade with, they are merely applying the councils agreed tests in terms of credit rating to create the Counterparty list. The investigation showed that the Counter party list was in line with Council policy.
Who has said that Butlers let the Council and WF residents down? Do you have proof that Butlers have not performed to the level required in their contract with WFDC? If so come forward. The Council is responsible for the deals it lets and the money it invests. I don’t seek to shirk from that responsibility.
Ofcourse I can not guarantee anything in terms of returns, in the same way that there is risk in the commercial money Market, that is why there is a potential return on investments. That is the advice from the Administrators.
I am confident that the Council took reasonable steps to limit the risks associated with the investments it makes. We were the victims of unprecedented global events.
All you seek to do is to advance your own political position from events, you are in danger of appearing to be no more than a political chancer.
You have no desire to listen to reason, and I am sure my reply to your post is pointless, you carry on doing what you are doing Neville and we will let the ballot box decide.
June 18, 2009 at 7:44 am
Thank you for your prompt response, John. Sadly, I don’t think you comprehended my questions, or perhaps didn’t want to answer them.
1. I didn’t say Butlers had let Wyre Forest residents down, I just asked why you didn’t negotiate a contract with them that would allow the council to terminate the relationship if they did?
2. My question as to why you didn’t employ financial advisers before making such a substantial investment was because (a) the Treasury Management Report (which you praise as fair) says, “Money was invested on the advice of Butlers – the Council’s treasury management advisers.” and (b) because the report also says, “The Council could not afford to employ officers with extensive treasury management experience and therefore had to rely on its treasury management advisers for advice.” Yet you and Butlers have stressed again and again that Butlers are not advisers, at all. So who is the report referring to?
Is this confusion not exactly why the Parliamentary Select Committee report last week called on the Chartered Institute of Public Finance and Accountancy, to warn councils “about over-reliance on treasury management advisers, whose services have been shown to be variable and, in some cases, inadequate?”
3. If “nobody” recommended ICAP and if Butlers are “segregated” from ICAP, how did you know to go to ICAP in the first place and why does the Treasury Management Panel report say that Butlers acted as “go between” on the deal? ICAP is not the sort of company to find in the Yellow Pages and if Butlers are only supplying credit rating data, how could they possibly act as “go between”?
4. Doubts about the stability of the Icelandic banks began to emerge many months before the crash and credit rating companies say they knew this. Although I am aware that much of the Wyre Forest money was invested on a fixed term while the Icelandic banks were triple A rated, is it not true that a substantial sum was invested with them only a few months before the banks failed? Had you employed adequate financial advice, as other councils appear to have done, would you not have known to avoid this later investment? Is that not why the Treasury Management Panel recommends pooling Hereford and Worcestershire local government resources to pay for proper financial advice in future?
5. I did not say that the money is lost but it is still not in your control. As you say yourself, you cannot guarantee what Wyre Forest might get back. Yet despite this, you keep making statements saying that this amount or that amount is rumoured to be coming back. Whatever the amount, I’m sure you’ll agree that it will be a lot less that you put into the banks in the first place.
I don’t envy what you are going through over this matter because the council was clearly out of its depth and didn’t get the support it needed to make the most of the money in its charge but as you chose to put yourself forward as leader of the council, you should expect to be properly held to account. I initially defended the council’s position on investing in Iceland but now that it appears inadequate financial advice was taken, you have to expect me to question that.
The fact that you sat on a committee scrutinising the actions of your own council, plus the alleged careful amendments to the report that I hear were recommended by the legal department before publication throws up more questions than the report answers. Once again, you try to dismiss legitimate questioning of your council’s actions as political point scoring or opportunism. It is failure to accept proper scrutiny that inspires the public anger all politicians are facing at present. It is disappointing that you remain so dismissive.
Neville Farmer