Friday, 17 October 2008

Barnet Council - Why they lost £27.5 Million in Icelandic Banks

One of the better things that the Labour Government has introduced is the Freedom of Information act. Before this, if you asked the council a difficult question, they could ignore you. Although it is flawed, now they have to either tell you or give you a good reason not to (ie security, damage to commercial interests etc). If you don't like the answer, there is an appeal process. Once you ask, they have 20 working days to respond.

Much of the information that appears on blogs such as mine comes from these requests. The downside of the system is that often, by the time you get what you asked for, the story has moved on. Just very occasionally though as you are watching one story disappear into the distance, another one pulls up next to you and your FOI request becomes even more interesting. When I was blogging for the Edgware Times, it became apparent to me that as soon as I posted a blog saying something nasty about the council, the editor, Phil Crowther's phone rang. I asked whether councillors sat around watching the Times website all day to see if I had posted something. Amused by my egotism, Phil replied, "No, Barnet Council media department have Google alerts so that any story relevant to the council sets a whole host of pagers beeping" or words to that effect. Now I know various commercial organisations and banks used Google alerts, but I hadn't considered that a council would (yes I know, silly me). I immediately posted an FOI request to see what words the council had on their list to get the pagers going. I expected a 20 page list, detailing all sorts of things which may affect Barnet and that the Council would want bringing to their attention for investigation. What did we actually get. Here's the actual list :-

London Borough of Barnet
Barnet Council
Mayor of Barnet
Leo Boland
Brian Reynolds
Councillor Mike Freer
Councillor Matthew Offord
Councillor Lynne Hillan
Councillor Melvin Cohen
Councillor Brian Coleman
Councillor Andrew Harper
Councillor Anthony Finn
Councillor Fiona Bulmer
Councillor Helena Hart
Councillor Richard Cornelius
Councillor John Marshall

Now if I'd received this list two weeks ago I'd probably have looked at it and discarded it. Thing is, many things have happened since then. I've done my level best to find out what you need to do if you want to avoid situations where you lose all of your cash in dodgy banking schemes. I've tried to find out what a finance department, with directors on huge salaries should put in place. I've tried to find out what a pro-active organisation does so that it can see the smoking wreck on the road ahead in time to slow down and avoid the crash.

Here's the issue. If I am the finance director at Barnet Council and I have £328 Million quid to invest, how do I make sure I put it somewhere safe? Well there are all sorts of organisations which rate various finance companies. The first thing to do would be to draw up a list of companies rated as secure (ie not going to go broke). Having done that you check the various deals and try and spread the cash around a few (not all your eggs in one basket). Now lets give Barnet the benefit of the doubt and assume they did all of this (it says they did in the report on the crisis). It says that they have deposits in 31 different institutions. So you have £328 Million in deposits in various banks you believe to be secure. What do you do then?

Well this is where I think I've got a world exclusive and you dear reader, may well be the first person to share this with me. If it was me I'd set up a few Google alerts for the institutions I've invested in, so that if any information comes to light on the internet to say they may be dodgy, I know straight away. My FOI request also told me that the council have a full time officer monitoring the internet on pay grade 34-37 (£29,286 - £31,419). Now I personally would have thought that his time would be better spent sifting through financial alerts than seeing if the fact COUNCILLOR RICHARD CORNELIUS opening a vegitable show in BARNET had made page 13 of the Burnt Oak Times website.

Councillor David Boothroyd, a Labour Councillor in Westminster, prepared a briefing paper on all of the warnings about Icelandic banks (for his own council) and kindly sent it to me. Now it appears to me that between 2005 and April 2008, there were multiple serious warnings that should have been picked up and escalated by Barnet. In the briefing, Councillor Boothroyd states that in April 2006 Arlingclose, an investment advisory company employed by 45 Councils issued advice to withdraw funds from Icelandic Company's. In December 2006, Moody's agency stated that Icelandic Banks may experience Liquidity problems. In March 2008 both Moody's and Fitch issued warnings. Also in March both Perth and Kinross and Surrey Council removed the Icelandic banks from their approved investments list. It seems that Mike Freer's assertation that "No one could predict the Credit Crunch" was a statement born of ignorance, for the want of a few Google Alerts.

Yes, I know that in reality, it's far more complicated than that. I have, however read the Barnet Council Cabinet report on the issue and there is not mention of monitoring of investments. There is nothing to say that any scheme of due diligence was in place to ensure that what was true 2 years ago is still the case and good investments are still good. The report says that they will, in future, tighten up the rules on deposits and put smaller amounts in banks with higher ratings. What I can't see anywhere is anything to say how regularly these policies will be reviewed. There is nothing to say we'll ensure that all investments are monitored. So the hole which knocked the wheel off the truck, still hasn't been filled in. If they check a bank with Moody's today to put £10 Million quid in, a warning is issued tomorrow, how will we know not to actually bank our cheque on Monday. My point is that with these huge sums of money, we need to be watchful all of the time.

I will part with this thought. If I was in charge of the council's finances and I'd read any of the warnings on Councillor Boothroyd's list, I'd have run a mile from any Icelandic investments. A simple Google alert would have done the job.


Anonymous said...

Leo Boland is the front farce or the facade, but the NAME that hardly anybody mentions is 'Brian Reynolds' (ex-Camden), I have not recently checked his full title but have a feeling he is now a Deputy Chief Executive. He is at the heart of some very very important policy advice to council committees. From Social Service at one point to Housing. His latest spin was earlier today at a Barnet Homes Housing Conference where once again the great & the good of housing professionals supposedly numbered about 95% of the delegates.More money, housing money feeding the rich. What is a small private housing comapny and quango wasting money on housing conferences. It is complete bewilderment to reasonable people having little to with the politics of housing and it's finances or local housing politics. Here's a man I will openly accuse of deceiving the taxpayer for his remuneration because he simply comes up with the abstruse, ie privatise everything through various Private Finance Initiatives. When we have advisers like him in addition to the local Finance Director,to local elected government, is it any wonder why £27.5 million is lost. Here is a supposed public servant and 'fat cat' with the power to go with it. The sort of public servant if you offered back to Camden for £1 million, Camden would probably pay us the £27.5 Million to keep him in Barnet.Between Councillor Freer & Brian Reynolds advice, the Financial Director probably had little say in the whole matter. One can't get a 4 Star rating by cutting services and jobs without bullshiting most of the time.

Why Barnet is failing? Check this guy's record out seriously. Today he was after money from newly titled and supposed supervisory bodies for housing, it is part of the preliminary to 'Stock-Transfer' all our housing stock to Barnet Homes so they can be considered as a Housing Association or Residential Social Landlord Status(RSL).


Talk today at this housing coonference was in £millions for this, £millions for that and millions for whatever."So when can we have the cheque"? Some of us have heard that before and as we found out, we are still waiting for the £98 million to repair our homes, if we create Barnet Homes. Brian Reynolds tell us where that money has gone? When public employees have near absolute power then power corrupts absolutely and the local taxpayer does not have the millions lost to expose it.

If anybody tells me that the previous ousted council leader is an angel, then tell us why the Ombudsman was critical of his role. In politics, old mud sticks to a leopard that is unlikely to change it's spots unless, it suddenly became an albino, that ambition to be a somebody is still there and the Tories still keep him. These are some reasons why the Tories fail the local electorate and our money goes missing probably more than the £27.5 million we hear about, due to poor governance and inept management.

Rog T said...


Thanks for the heads up. I will certainly follow your advice and have a little peek at Brian Reynolds and his career.

That's what we're here for and it's all part of the service !!!!

Unknown said...

So you expect a communications bod to monitor 'chatter' about investments they probably didn't even know the council had? That a bit like saying that running a successful business entails filing dormant accounts year on year......

Rog T said...

I'd expect a communications expert to set up a mailbox which then filtered the alerts based on a system of rules to forward them on to the relevant person to action. In the case of warnings regarding the Icelandic banks, someone in the finance department.

Then again, what do I know, I just run a studio. I suppose the jibe about the dormant accounts is probably because you are too thick to actually find the accounts for the companies I currently operate.

Don't Call Me Dave said...


I suspect the dormant accounts jibe is aimed at me. I am a director of 11 companies, 4 of which are not active. It is quite common for people to register company names to hold for future use or to prevent others from attempting to pass themselves off as you. Some people are too stupid to realise how the real world works.

The companies which are ‘live’ have all been going for years (some for nearly 60), all make a profit, and all pay substantial taxes for the benefit of the economy. No company I am a director of has ever been forced into creditors liquidation for unpaid bills and taxes. We pay all of our bills.

First they dig up a news article from six years ago about you. Now this. It is really rather pathetic.