Examination of Witnesses (Questions 120-124)
MR MIKE
WEAVER, MR
PETER ANTILL
AND MR
ALAN CROSS
26 JANUARY 2009
Q120 John Cummings: You say you would
be quite pleased for the Government to do that?
Mr Antill: I would be very pleased
for the Government to provide that.
Q121 John Cummings: Would you also
be very pleased if the Government took control of all local authority
investments?
Mr Antill: I just ask the question,
does the Government see a need for that? I am not sure. I think
the events are unprecedented and that would be, to my mind, action
above the cause
Mr Weaver: If I might add, the
financial world has moved on. It has got a lot worse since October.
Looking at the Icelandic experience in isolation at that time,
but then reflecting on it in the context of the financial support
which the Government is making available to the financial sector
and the banking community generally, I think there is a case,
complex though it is, for policymakers to be thinking about the
application of asset protection schemes in the banking industry,
whether there is a read across in the Icelandic situation. This
is, I think, particularly complicated because there are diplomatic
considerations between two governments. This is not a simple case
of a very unwelcome bankruptcy, it is a bit more complicated because
of the intergovernmental relationships which are taking place.
So I think, with respect, simple yes and no answers this afternoon
are not going to help but I do think there is an opportunity to
reflect on the asset protection schemes which the Treasury has
thought about for the rest of the financial sector, and should
policymaking in respect of Iceland be kept up-to-date with the
rest of the policymaking that is taking place in the banking sector?
Q122 John Cummings: So you are saying
that you would not support the reintroduction of lists of approved
investments?
Mr Weaver: Not unless there is
some statutory backing behind all of this because if the Government
was going to say, "Look, there's the gold-plated list. Place
your money with those organisations." What happens if one
of those organisations goes bad ways?
Chair: Which is exactly what happened
with BCCI.
Q123 John Cummings: What consequences
have the changes made in 2007 had to the Public Works Loan Board's
rules for debt repayment?
Mr Weaver: Again, from a county
perspective I think we were disappointed that the rescheduling
opportunities, the early repayment opportunities have become more
expensive, but, truth to tell, local councils have responded to
that. We are seeing premature, early repayments being made and
I suspect if the Public Works Loan Board were here they would
say, "If it ain't broke, don't fix it."
Q124 John Cummings: Do you think
the rules should be changed?
Mr Weaver: I think, looking at
this through the eyes of the Public Works Loan Board, they probably
felt local government—forgive me for putting it this way—was
onto a very good thing in the way the old rules worked. I think
they have redressed the balance and it is unfortunate and disappointing
that it is less advantageous to local government now than it was.
Mr Cross: I think one of the issues
there is that a margin was introduced between borrowing rates
and repayment rates. It has not been welcomed by local government.
Whether the margin is at the right level for the long term, I
think some of us on the local government side would query. There
has been some activity in the last six months, probably a lot
more activity in the last six months, but it has taken some fairly
extreme movements in the UK yield curve that we have seen in the
last six months to lead to that activity. There was not very much
activity, I suspect, between November last year and the first
six months of this financial year.
Chair: Thank you very much. Just for
Mr Antill's benefit, I think the Government did make it clear
that if it appeared that councils have to make a big write down
in one year and it had a big effect, they would actually move
it over into the next year, just so that the reporters do not
give the impression that district councils are going to be clobbered.
They are not. Thank you very much.
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