Friday, 24 October 2008

No mere bagatelle

Betsan Powys has kindly provided some of the figures that I didn't have when I posted this a fortnight ago. Our local councils have a combined total of £581million in reserves – that is a very large sum of money. It's not the total of public sector reserves in Wales, of course. On my reading of the numbers, this is just the 22 county councils – other public bodies such as health boards and trusts and police authorities also hold significant reserves. The total is probably a couple of hundred million more.

The councils and other bodies who hold the reserves are entirely correct to point out, of course, that much of these funds are earmarked, and only held for a comparatively short period as reserves. I accept that argument, and to try and commit the whole of these funds to long term investments would be foolish. But that is no excuse for investing them, even in the short term, outside of the economy that these bodies are supposed to be serving. Even short term investments of £700 - £800million could be making a difference to Wales.

I'm most interested in the core figure – the unallocated total of around £144million. (This too would be higher with other public bodies added in). Divided between 22 councils it comes to an average £7million each, as Betsan says. From each individual council's point of view, investing it to earn maximum interest looks like a sensible financial decision. From the point of view of each individual council, this is money which they might need to call on at any time. But, when added up, it simply doesn't look so sensible for Wales as a whole.

Even assuming that the whole of the earmarked funds are spent in the year (a major assumption in itself), what these figures are telling us is that, on every single day of the year, there is at the very least somewhere between £150 and £200million of Welsh public finance invested in short term high interest accounts when it could be used for investing in the Welsh economy.

Whether through the creation of a People's Bank, as Adam Price and others have suggested, or through some other mechanism, we need to be pooling those resources and using them to boost the Welsh economy. A reduced rate of return to individual public bodies is a small price to pay.

No comments: