Newham Overview & Scrunity "Call in" on SPV - 6.30pm Monday 24 August 2015

Tomorrow evening at Committee Room 1, East Ham Town Hall, members of Newham Council Overview & Scrutiny will debate a request from a Cllr that up to £500,000 should not yet be spent on a proposed Special Purpose Vehicle (SPV) for its staff pension fund.

Cllr Farah Nazeer has asked that this proposal should, firstly, get agreement from the Newham Investments & Accounts (I&A) Committee. She quite rightly points out that in a time of public spending cuts the Council should not be committing to this proposal until the I&A have made an informed decision to support further investigation into what is an expensive and potentially risky measure.

As far as I can make out the idea is that Newham will let its pension fund have some sort of control over a council owned asset in exchange for reduced employer contributions to the fund.  I have posted my concerns on this proposal here and here

There has been some interesting coverage in the Pension press. Professional Pensions have covered the story and there was a measured article on the use of such "alternative funding" in the Local Government Pension Scheme (LGPS). However, it points out that they are complex, expensive  and there are "key issues" (see below)

What are the key issues for schemes?
1) Valuation of the underlying properties. Would the administering authority invest in the assets if they were not held under this structure? Funds should also ask for the unoccupied value in addition to the current occupier value. If the employer becomes insolvent, the property will be unoccupied so that value will be relevant.
2) Conflicts of interest. Is the local authority in its capacity as administering authority of the pension fund acting solely in the interests of the pension fund and its members?
3) Ensure the arrangement doesn’t breach any regulatory requirements.

The model being proposed for Newham also seems to be very different than that used in the private sector.

In the private sector if the assumptions behind the SPV fail and go "belly up" then the pension trustees can sell the assets to make up the loss of contributions. With the Newham model this does not appear to happen and instead the Council will start to pay rent and maybe increase its contributions? Which makes me wonder - with regard to 2. above and "conflicts of interests". What is in the interests of the Newham pension fund to allow this to happen? 

Why would the fund agree to a potential minimum of 3 years of under-funding at a time of large pension deficits, massive cuts in government support and no Crown promise if the sponsor (i.e. the Council) goes bust?

Mind you, I have not had access to all the reports since Chief Officers are refusing to let me see them. Despite being an elected Councillor and a member of the Investment & Accounts Committee.

The website for Council Finance Officers "Room 151" also points out here that:-  

"The Pensions Regulator warned in 2013 that the use of such complex structures “can lead to increases in risk where advisers to schemes have not anticipated all the implications of using this structure”.

It added: “It is vital that trustees understand the risks they are taking and consider carefully whether a more complex approach to supporting the scheme, which may involve additional risk taking by the scheme, is preferable to a straightforward one.”. 

Tomorrow's meeting should result in more information coming out about the proposal but so far it seems to me that it is nothing more than a speculative bet that the fund will perform better than our advisers think it will.

The fund is already in deficit because for various reasons it has historically under-estimated how much money it needs. There will have to be extremely good reasons and proper scrutiny for the fund to risk any further mistakes with our staff's pensions.

Overview & Scrunity "Call in" expenditure on Newham "Special Purpose Vehicle"

I was very pleased to hear this evening that members of Newham Council Overview & Scrutiny Committee had agreed to "call in" the Executive Mayor's decision to spend up to £500,000 on developing a  "Special Purpose Vehicle" (SPV) for the Newham Staff Pension fund.  This decision to spend the money was made without the agreement of the Investment & Accounts Committee.

I have raised concerns about this proposal here, "Professional Pensions" have questioned whether it is costing too much here and a "leading financial figure" described it as "bloody dangerous" here.

Many thanks to Cllr Nazeer for requesting the "Call in".

"Dear Members of Overview and Scrutiny.

I am writing to request that you support my application to "call in" the decision by the Executive at the Cabinet Meeting on Thursday 23^rd July 2015 (item 5) to spend up to £500,000 of public money on setting up an “Alternative Asset backed Financing for the Newham Pension Fund”.

I believe that this is the wrong sequencing for this decision because the proposal has not been consulted upon and agreed beforehand with the Newham Council Investment & Accounts Committee. As a member of this committee I am concerned that this proposal may not be in the best interests of the Council nor the staff Pension fund and we might waste this £500,000 if the Committee decide that this proposal is not appropriate. I understand that the alternative asset proposal has significant risks attached to it which I feel merit proper scrutiny. 

It is inappropriate in principal for any such proposal to go ahead without the agreement of the Investment and Accounts committee beforehand.

I request that the Overview & Scrutiny(O&S) should examine the arguments and consider making a recommendation back to the Executive that no further expenditure of public funds is made until the Investment and Accounts committee have had a chance to fully consider the proposal and are made aware of all  the possible costs and benefits of the scheme".

Cllr Farah Nazeer. 

West Ham & East Ham Labour Campaigning Weekend

This is another picture collage of West Ham (and East Ham) Labour out campaigning this weekend.

There is a Stratford & New Town ward team in Abbey Lane, E15. While East and West Ham activists were out Sunday morning with Ilford South, Mike Gapes. In the afternoon, Stephen Twigg was at Ilford North to show support. I went door knocking with Tower Hamlets Councillors, Josh Peck, Danny Hassell and Redbridge Councillor, Stuart Bellwood.

We went to Roding ward where we a pretty good response. I spoke to a number of residents who despite being in their 20's were first time voters intending to vote in this election and those who were genuinely undecided who to vote for and were up for a  political conversation.

At one home Danny knocked at an enormous Rottweiler dog charged out of the doorway despite being called back by its owner, but after a few dodgy seconds we realised that it was very friendly and in fact as soft as butter.

Back at the Ilford North Campaign base I spoke to a fellow North Walian about Labour chances in Clwyd (North Wales) and than ran into more West Hammers returning from another door knocking team.

I couldn't resist including the fanatic picture of Labour Leader, Ed Miliband and the Chester Hen Party (top right) nor the picture of baby Juniper (daughter of Cllr Farah Nazeer) with the Kinnocks in Hampstead & Kilburn. 

Labour Campaign Launch at Olympic Park

Yesterday morning Labour Leader Ed Miliband launched the Party campaign at the top of the Orbit.

Ed is pictured in the collage (top left) shaking the tiny hand of Juniper, baby daughter of Newham Councillor, Farah Nazeer.

UNISON Assistant General Secretary, Liz Snapes,  was also there.

Waiting outside for Ed to appear there was definitely an air of excitement amongst supporters. The 4 tory yobs who dressed up as SNP supporters arrived to late to shove anyone.  I hadn't applied for a ticket and so went for a swim in the Aquatic centre next door.

"Women & Power in Europe" Compass in Newham debate 24 June 2014

This looks really good but I have a union clash in the evening so not sure if I can make it. I only know Newham Councillor Farah Nazeer, who is an intelligent and thoughtful speaker.

The meeting is being Chaired by former Newham Councillor Graham Lane, whose excellent book "How Different Governments Have Weakened Local Government and Democracy" I have recently finished reading and will post upon soon.