Conrad Hall: ‘more sophisticated’ regulation needed for local government
The chair of the CIPFA/LASAAC Code Board has questioned the sophistication of financial regulation in local government and the continuing focus of the Department for Levelling Up, Housing and Communities (DLUHC) on Minimum Revenue Provision (MRP).
Conrad Hall, who is also the director of resources at London Borough of Newham, said that MRP was a “blunt instrument”. While some local authorities had “misused” the MRP system, he suggested that there were more important risks that needed to be addressed, including those from major regeneration projects.
Hall was speaking as a member of the finance panel at Room151’s Monthly Online Treasury Briefing (MOTB), which discussed the government’s revised MRP proposals.
It feels like government is trying to regulate and oversee things they understand and can relatively easily deal with, rather than understanding what the risks are and designing a regulatory regime accordingly.
Regeneration risks
“There are far bigger risks associated with a major regeneration scheme, particularly at the inception phase of it, than whether you quite make enough MRP,” he said.
“For example, the assumptions that are made about future rental streams and sales values in five years’ time. And all the financial models underpinning it are entirely auditable but never are.”
Hall said he wondered if DLUHC understood what a “more sophisticated and mature regulation of the sector might look like”. Significant risks were being ignored by current regulation and audit regimes, he suggested.
“That can’t be right if you are in the business of trying to ensure that you have an appropriate framework in place and local authorities aren’t taking unreasonable risks.
“I do think there is a real issue for government to think about. At the moment, it feels like government is trying to regulate and oversee things they understand and can relatively easily deal with, rather than understanding what the risks facing the sector are and designing a regulatory regime accordingly.”
Positive proposals
Hall did welcome the revisions made by the government to its MRP proposals, suggesting that the government had “listened and made sensible changes”.
Stephen Sheen, managing director of Ichabod’s Industries, said that the new proposals were a “happy outcome”, while Christine Golding, chief accountant of Essex County Council, said she was “very encouraged” by the changes.
Nikki Ulyatt, associate director, technical, at Link Group, questioned the short timeframe on the latest consultation – with the sector given until 1 July to respond.
“Is two weeks long enough? Given the depth and breadth of this area and the potential impact for authorities, I don’t think it is personally enough,” she said.
The MOTB session also included an analysis of macro-economic trends by Vincent McEntegart, portfolio manager, multi-asset group, at Aegon Asset Management.
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