Local Authority Investments

March 4th, 2019 by James Goudie QC in Capital Finance and Companies

The Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2019, S.I. 2019/396, make amendments to the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 (S.I. 2003/3146) (“the 2003 Regulations”). The technical amendments define the investments that shall not be treated as capital expenditure within local authority accounts. They also amend the categories of local authority investments in relation to which fluctuations in fair value are subject to specific accounting treatment.

Under the 2003 Regulations, local authorities must follow CIPFA’s Code of Practice on Local Authority Accounting in the United Kingdom, as amended or reissued in every financial year. The Government can modify local authorities’ duties to follow the proper practices set out in the Code on Local Authority Accounting, by including specific provisions in the 2003 Regulations. It also has a specific power to provide through regulations which expenditure of local authorities is, or is not, accounted for as capital expenditure. The 2003 Regulations make provision for capital finance and accounts under Part 1 of the Local Government Act 2003 (“the 2003 Act”). Regulation 25 of the 2003 Regulations provide for expenditure which is, and which is not, to be treated as capital expenditure for the purposes of Chapter 1 of Part 1 of the 2003 Act. Since 2004, Regulation 25 has excluded local authority investments in money market funds from treatment as capital expenditure in local authority accounts. Regulation 30K of the 2003 Regulations provides for specific accounting treatment for fair value gains and losses of local authority investments in pooled investment funds, including money market funds.



Capital Finance

November 27th, 2018 by James Goudie QC in Capital Finance and Companies

The Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2018, SI 2018/1207 amend the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 (the “2003 Regulations”). Regulation 3 amends regulation 23 of the 2003 Regulations in order to allow a local authority to use capital receipts to make a payment to an employee or officer under new regulation 30AA. Regulation 4 inserts a new regulation 30AA into the 2003 Regulations.

Read more »


Pooled Investment Funds

November 9th, 2018 by James Goudie QC in Capital Finance and Companies

The Government has announced that it intends to:-

  • Require local authorities to account for fair value movements in financial instruments in accordance with proper practices as set out in the Code on Local Authority Accounting published by CIPFA
  • Introduce a mandatory statutory override requiring local authorities to reverse out all unrealised fair value movements resulting from pooled investment funds. This will be effective from financial year commencing 1 April 2018
  • Extend the proposed period for which the statutory override applies to five years. The Government will keep use of the override under review
  • Require Local Authorities to disclose the net impact of the unrealised fair value movements in a separate unusable reserve throughout the duration of the override
  • Introduce a 2 year extension of the unequal pay regulation.

There will be no override for the expected loss model or for the extra disclosures that the new standard requires. Read more »


State Aid

October 15th, 2018 by James Goudie QC in Capital Finance and Companies

In R (Sky Blue Sports & Leisure Ltd) v Coventry City Council (2018) EWCA Civ 2252 the Court of Appeal rejected a challenge brought by the owners of Coventry City Football Club against the City Council. The Council had a half-owned subsidiary, Arena Coventry Limited (“ACL”). ACL has operated the Ricoh Arena in Coventry, where the Football Club play home games. The Claimants sought to challenge by judicial review the Council’s decision to extend ACL’s lease of the Arena.

Read more »



March 14th, 2018 by James Goudie QC in Capital Finance and Companies

The Local Authorities (Capital Finance and Accounting) (Wales) (Amendment) Regulations 2018 (SI 2018/325 (W.61)) amend the Local Authorities (Capital Finance and Accounting) (Wales) Regulations 2003 by: introducing new definitions of “securitisation transaction” and “money market fund”; providing that a securitisation transaction must be treated as a “credit arrangement” for the purposes of the Local Government Act 2003 s.7; making a substitution to provide for the calculation of the cost of a securitisation transaction; replacing the term “fixed asset” with the current terminology in local government accounting practice; making it clear that sums received by the local authority in respect of the redemption of a bond on its maturity, or disposal of a bond, must not be treated as a capital receipts, unless the bond was acquired before 1 April 2018 and the expenditure on acquisition was treated as “capital expenditure”; inserting a new reg.8A which provides that the value of any consideration received as a result of a securitisation transaction by a local authority must be treated as a capital receipt; removing the requirement that only capital receipts received in respect of a disposal of an interest in land other than housing land may be used to meet the costs of, or incidental to, the disposal, provided such costs do not exceed 4% of the capital receipt arising from the disposal; removing the requirement for expenditure by local authorities on the acquisition of loan capital to be treated as “capital expenditure”; extends the ability of local authorities to defer charging liabilities for back pay due to equal pay claims to revenue account until the date on which the local authority must pay that back-payment; and removing the reference to one of the documents identified as constituting “proper practices” for the purposes of the Local Government Act 2003 s.21.


State Aid

March 8th, 2018 by James Goudie QC in Capital Finance and Companies

Does a transfer of property-related assets from the public to the private sector constitute State Aid. This was the issue before the Grand Chamber of the ECJ in Case C-579/16 P, FIH Holding A/S v FIH Erhversbank A/S, Judgment on 6 March 2018.  The Court reiterated:

(1) Classification of a measure as “State aid” for the purposes of Article 107(1) TFEU requires all of the conditions set out in that provision to be fulfilled;

(2) First, there must be an intervention by the State or through State resources;

(3) Second, the intervention must be liable to affect trade between Member States;

(4) Third, it must confer a selective advantage on the recipient;

(5)  Fourth, it must distort or threaten to distort competition; Read more »


State Aid

March 8th, 2018 by James Goudie QC in Capital Finance and Companies

Case C-127/16 P, European Commission v French Republic, ECJ Judgment on 7 March 2018, has concerned unlawful State Aid by SNCF in the context of restructuring and recapitalisation and the application of the private investor test to an assignment of debts en bloc.   The Court stated as follows:-

(1) In interpreting a provision of EU law it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part;

(2) The operative part of a Union act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption;

(3) State aid law is not concerned with the legal forms that transactions may take, but rather focuses on their economic reality; Read more »



February 5th, 2018 by James Goudie QC in Capital Finance and Companies

Statutory Guidance (3rd Edition) on Local Government Investments, under Section 15(1)(a) of the Local Government Act 2003, and effective for financial years commencing on or after 1 April 2018, has been published on 2 February 2018.  Also on 2 February 2018, Statutory Guidance (4th Edition) on Minimum Revenue Provision has been issued, under Section 21(1A) of the 2003 Act.  Both were preceded by consultation on proposed changes and are accompanied by a summary of consultation responses and the Government’s responses to those responses.  This document states:-

“Following consideration of the consultation responses the Government, in summary, intends to:

  • make some technical changes to the Investments Guidance and the MRP Guidance reflecting respondents’ feedback;
  • amend proposals related to the Useful Economic Lives of assets;
  • implement the Investments Guidance for 2018-19, but allow flexibility on when the additional disclosure first needs to be presented to full Council or its equivalent; and
  • defer implementation of MRP Guidance to 2019-20. This is in recognition of the fact that it is very late in the 2018-19 budget setting cycle.”


State Aid

December 4th, 2017 by James Goudie QC in Capital Finance and Companies

The Ricoh Arena saga continues. In JR1 Coventry City Football Club’s owners, SISU, failed up to the Supreme Court in their State Aid challenge to Coventry City Council’s £14.4m loan to the company, ACL, which the Council half owned that operates the Arena. The Market Economy Investor Principle was satisfied.

SISU have now brought JR2, which is to be heard on 2/3 May 2018. This seeks to challenge as State Aid the Council’s subsequent deal with Wasps Rugby Club.  On 28 November 2017 the Court of Appeal gave interlocutory rulings, allowing SISU to amend its claim, provided that the case on State Aid was confined to the lease extension granted by the Council to ACL, and allowing the introduction of expert evidence.


Infrastructure projects

November 24th, 2017 by James Goudie QC in Capital Finance and Companies

The Treasury has on 22 November 2017 confirmed that it will lend local authorities in England up to £1 billion at a new discounted interest rate of gilts + 60 basis points, accessible for three years, with a maximum term of 50 years, to support infrastructure projects that are “high value for money”. Details of the bidding process are to be published in December 2017.