Tuesday, 27 June 2017

Common Good revisited: still under-performing?


The nine Common Good funds in the Scottish Borders received only £69,000 from a combined investment portfolio of £2.7 million in 2016/17 while the common land and property in a former Scottish burgh just a few miles away  recorded a £600,000 return for its trustees.

The £69,000 figure represents a 2.5% investment 'dividend for Scottish Borders Council, administrators of the funds in a year when the council's own pension fund achieved a 21.5% return

Serious concerns were voiced four years ago over the alleged poor management of the Borders funds with a dismal financial performance and a failure to fully exploit the valuable assets granted to local burgesses and freemen by various charters of the Scottish kings over 500 years ago.

While the Common Good lands and properties in Duns, Galashiels, Hawick, Jedburgh, Kelso, Lauder, Peebles and Selkirk appeared to be in the doldrums in 2013, the single fund managed by the Berwick-on-Tweed Freemen Trustees was chalking up impressive financial achievements.

At that time SBC announced that the £2 million cash balance in their funds was to be transferred to a “private firm of global fund managers.”

Berwick, one of the four original Scottish burghs founded in 1125, received its common from the monarch in 1491, around the same time as several of the other towns in the Scottish Borders.

The trustees at Berwick have 2,550 acres of land under their control with a value of £6.508 million, according to the charity's latest available accounts (2015/16). The fund generated more than £600,000 from investments and was able to devote more than £500,000 to "charitable activities".

A new set of accounts covering 2016/17 for the now nine Borders Common Good funds - Innerleithen has been added to the list since 2013 - allows a modern day comparison to be made with Berwick-on-Tweed.

Between them the funds, amalgamated into a single charitable trust several years ago by SBC, have land holdings in excess of 5,000 acres including three Selkirk farms extending to 1,300 acres, 800 acres of farmland at Hawick and a 1,700 acre common at Lauder.

Total income from investments in the last financial year added up to £69,000 made up of £66,000 from the £2.7 million investment portfolio in the Newton Real Return Fund plus £3,000 in bank interest from the "Scottish Borders Council loans fund".

The council charged  £48,000 for 'governance costs' incurred in administering the trust - the same figure was levied in the previous fiscal year - and Common Good donations to worthy causes totalled £171,00 (£89,000 in 2015/16).

When the various deductions were made from the funds net income last year was a decidedly unimpressive MINUS £139,000 compared to PLUS £433,000 the year before. The bottom line was a reduction of £149,000 in the net movement in funds against an additional £503,000 for 2015/16.

Total funds carried forward fell from £13.895 million to £13.746 million.

Meanwhile over in Berwick-on-Tweed a seemingly highly efficient regime saw total funds carried forward increase from £21.687 million to £22.024 million. In March 2011 the Berwick fund stood at £17.9 million, so there has been considerable value added since then.

In a section headed Plans for the Future, the report carrying the Borders accounts declares:" The Common Good Funds will continue to maintain their heritable assets and will look to maximise their income from any of these assets which are let commercially. Where assets are used by third parties towards the Common Good of the Burgh then rental levels may reflect this aspect of the tenants’ activity."

The Common Good agenda item for this week's committee meeting appeared alongside SBC's draft accounts for 2016/17 which we have already reported on, and the local authority pension fund.

There was much better news for members of the pension fund than the slim pickings for the Common Good trustees who happen to be all 34 members of the council.

The SBC Pension Fund accounts reveal: "Strong three-year annualised investment performance of 10.9% - 0.9% above benchmark; 2016/17 Strong one year performance to March 2017 with investment returns of 21.5% in the year to a benchmark of 19.5%."

It means the pension fund now has £654m in net assets, an increase of £112m on 2015/16.

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