More than £15m of South Holland District Council cash is currently in the accounts of other authorities, with no interest rate above one per cent.
Currently, SHDC has almost £10m out to the likes of London Borough of Enfield (£5m) and Cambridgeshire County Council (£4m).
These are classed as “cash investments” by the council, rather than loans.
The lowest rate of interest is currently 0.78 per cent, on more than £8m out to Oadby & Wigston Borough Council and Cambridgeshire County Council.
Public money is not just with other local authorities – banks are also holding council cash. A year-long “cash investment” of £2.5m to Lloyds Bank ends in November.
Other banks that have had SHDC cash investments this year include Qatar National Bank (£1,008,000 at 0.83 per cent interest) and First Abu Dhabi Bank (a one-day £5,025,000 loan at 0.60 per cent).
The council strategy is to “invest” in institutions with a good credit rating, but last year, the council invested £10m in Northamptonshire County Council – a cash crisis council. This was in the form of two cash investments of £5m each, one at 0.3 per cent interest and one at 0.25per cent.
In 2018, the total amount out to local authorities alone was more than £19m.
The council also has money invested in its own company, Welland Homes. This is a traditional loan which it classifies as capital expenditure. These loans, totalling more than £1.3m, are at a higher rate of interest (3.5 per cent) and run over a much longer period, 30 years.
The money used for cash investments, the council explained, is money that has been collected, such as Council Tax and business rates on behalf of Lincolnshire County Council, but not yet paid out again to its final destination.
It is also taken from The General Fund Reserve, Housing Revenue Account Reserves and Special General Fund Reserves. The council said money from reserves can’t be used to support day-to-day service expenditure.
The council said it makes its cash investment decisions based on daily market information provided by brokers and financial institutions.
SHDC said it currently doesn’t need to use short term cash borrowing or long term borrowing to support capital expenditure, so doesn’t borrowing from any other authorities.
The council currently has £67.456m of Housing Revenue Account longer term borrowing with the Public Works Loan Board which matures in March 2062.
