Call for new curbs on council finance advisers

FSA should regulate advisers to councils, say MPs

MPs will today call on the City watchdog to be given new powers to police companies that advise local authorities and other organisations such as charities on where to hold their money.

It comes in the wake of the Icesave debacle in which £1bn of taxpayers' money was put at risk together with tens of millions more in charitable donations after the Icelandic bank collapsed. Such bodies have previously been seen as informed consumers who are not in need of the sort of protection offered to ordinary people by Britain's system of financial regulation.

But in a report to be published today the Communities & Local Government Select Committee will say that clear failings have been exposed by the Icesave affair.

The report will say that the FSA should gain new powers to regulate the advice given to public-sector bodies about the management of their cash reserves and investments.

The committee wants the watchdog to use these powers to scrutinise both the services provided and the professional independence of companies that offer local authorities "treasury management" advice.

Phyllis Starkey, chairwoman of the committee, highlighted concerns about the independence of some of the advice given and said that many councils were unaware that the firms they were dealing with were not regulated for the advice they provided to councils.

The committee has highlighted the way brokers typically used "authorised and regulated by the FSA" on their letterheads and promotional literature.

It has written to Lord Turner, the chairman of the FSA, to express its concerns about the issue, saying: "All four firms which conduct business as local authority treasury management advisers state prominently on their marketing and other literature that they are "authorised and regulated by the FSA".

"As a Committee, on the basis of the response which you have given to our report, we are now puzzled as to how this statement can in any meaningful sense be said to be true. Most activity by treasury management advisers is, under the legislation by which you work, not regulated. That small portion which may be regulated you effectively ignore because the firms carrying it out are too small to raise a blip on your regulatory radar."

Ms Starkey said that while the procedures of many local authorities had improved in terms of treasury management, more needed to be done to ensure no repeat of the Icesave saga.

"Councils might be considered informed consumers but they need advice and they would struggle to be able to pay the sums of money needed to get the quality of advice they need internally," she said.

"That means that they have to look externally. These are not like private-sector organisations. They handle large sums of public monies."

While the FSA's responsibilities have been progressively increased since its creation from the amalgamation of nine regulators, it has indicated that it would not be unhappy to take on the job. However, a spokeswoman said it would require legislation which was "a matter for Parliament".

Life and Style
A teenager boy wakes up.
life
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
Life and Style
fashionEveryone, apparently
Voices
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
PROMOTED VIDEO
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
music
Sport
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Life and Style
tech
Extras
indybest
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
food + drink
News
i100
News
i100
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Arts and Entertainment
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style