Calls for LOCAL control of Common Good funds

EWAN LAMB continues our coverage of a burning Borders issue

A group of "campaigners" from the Scottish Borders have urged Scotland's Parliamentarians to place the administration and management of Common Good funds in the hands of the townsfolk who are supposed to benefit from the assets and end the current regime of 'remote control' by large local authorities.

The Scottish Parliament's Local Government and Communities Committee is looking at the current legislation surrounding the ancient funds to see whether it requires tightening up or strengthening. And an invitation calling for written submissions must have left the committee members in no doubt that changes are needed as a matter of urgency.

Not Just Sheep & Rugby has already reported on contributions from Hawick Callants Club, and from Derick Tait, a former chairman of Future Hawick.

That organisation has lodged its own submission which is as hard-hitting as the rest.

Future Hawick has told the committee:"The definition of what is and what is not common good is all too often open to misrepresentation and misinterpretation.  Greater clarity is required and the rules need to be obeyed as common good property needs to be properly administered for the community it serves.

"The recent compilation of assets lists has clearly demonstrated a desertion of duty in this respect by local authorities, many of whom tend to regard common goods as a nuisance to their administration.  While attempts to address this issue have been made as a result of Scottish Government initiatives, the delays which have occurred in compilation are a sign of lack of proper record keeping.  All too often, administration of common good funds has been treated by local authorities as a right rather than an obligation, and to suit the ends of the local authority rather than the community.

"The administration of common goods has become remote from the communities they are supposed to serve.Often, councillors who have no connection with a particular common good are responsible for its administration and have no knowledge of community requirements.  In the Scottish Borders, all councillors are de facto trustees of all common goods and in effect control their administration. 

"While local sub-committees are appointed for each common good, final decisions rest with the full council.  This is not a sustainable situation, and there is a need for greater devolution of management to the communities the common goods serve.  More effective and dedicated management would be attained through the establishment of local committees comprising members of community councils and representatives of local civic and cultural organisations, all with full voting rights.  At present the situation where community councillors can sit and speak, but not vote, on common good committees is anathema to the democratic process."

Former Hawick councillor Andrew Farquhar is equally forthright in his submission.

He writes:"It is unfortunate that the legislation at that time did not allow for some form of local democratic administration to be put in place within the Burghs that owned them. Recent consultation has confirmed that some authorities view Common Goods as an inefficient administrative burden and are seen as diverting resources from the work done by them in the expanding role of delivering local services in partnership with communities.

"Managing Common Good assets is understandably low in the list of council priorities and has not been without controversy. The importance can be measured in local terms however because in Hawick for 2013/14 the net assets are shown to be £3.061 million with a deficit for the year of £115,000. Common Good assets have not fared well under Council stewardship due to councils having to do more with less. Administering the Common Good is low down in their list of priorities. E.g. Progress made with registers of assets!"

Committee hears Common Good mismanagement allegations

DOUG COLLIE reports on disturbing claims in Hawick submissions

A SET of written submissions to the Scottish Parliament's Local Government & Communities Committee contains evidence of alleged mismanagement of the country's network of Common Good funds including poor record keeping, and valuable assets having disappeared or been misappropriated by councils.

Members of the committee are currently investigating the status of scores of Common Good funds which have been in existence for centuries, and should now be worth hundreds of millions of pounds.

The MSPs will determine whether changes in ancient statutes are necessary to protect the funds from further decline and to ensure they achieve their full financial potential.

Not Just Sheep & Rugby has reported in the past on the poor investment returns being chalked up by funds in the Scottish Borders compared to a neighbouring common entity in Berwick-on-Tweed.

The Borders funds have been combined into a single organisation with investment managers appointed to look after each town's interests. But complaints persist that the funds continue to under perform.

As part of its investigation, the Holyrood committee issued a call for written submissions which have been published. And this week members started taking evidence from experienced Common Good witnesses, including Dr Lindsay Neil, of Selkirk, a regular critic of how his town's fund has been run by Scottish Borders Council.

A number of the most critical and hard-hitting submissions have come from Hawick which has a Common Good fund worth in excess of £3 million. The fund includes farmland, woods, buildings and movable assets which have recently been comprehensively listed for the first time in ages.

In their written contribution members of Hawick Callants Club have told the committee: "Many of the common goods have been merged by these larger councils and the loss of local knowledge has generally resulted in inadequate control over the goods. The Scottish Government’s instruction to Local Government to compile lists of common good assets has exposed the failure to maintain accurate records.

"Hawick Callants Club have recently been instrumental in raising the issues of omission of Moveable Assets in the Hawick Common Good Fund. This was directly as a result of the Hawick Councillors insisting that Scottish Borders Council inform Hawick civic groups, including this Club, of items they had recorded on the Moveable Assets list."

The Club says it immediately identified a significant number of assets missing from the list and after further investigation noted numerous further omissions although there were conflicting views of what was common good and what was not. Numerous townsfolk had donated to the ‘town’ thinking they were going to the common good, but the council had argued that they were donated to a museum and therefore were‘council’ property.

"These donations need to be assessed to ensure the correct recipient is identified", add the club. A club member who held a senior position in the previous organisation, Roxburgh District Council, maintained that a full list of all fixed and movable assets of Hawick Common Good Fund had been prepared at the end of the District Council in 1996, but SBC were unable to find this list and others that had been mentioned to them.

"This is a prime example of a remote organisation failing to keep accurate records of local assets. Very recently another club member identified an area in Hawick where potential movable common good assets are stored and these are now being checked. At the moment, unfortunately, due to the way SBC is structured, any actions taken by the sub-committee can be overturned by councillors from other wards. This arrangement totally defeats the whole purpose of common good being managed locally and leaves the funds at the mercy of someone who is not interested in the local community."

Local man Derick Tait - a former chairman of Future Hawick -  had some equally strong and sensible things to say in his submission.

Mr Tait writes: "Common Goods were once an important specific part of local community culture, managed by Town Councils and the like, which because of their dedicated specialist knowledge, were able to manage and disburse their obligations in that respect conscientiously, expediently, and appropriately.

"Sadly, as local government has become bigger (but not better), management of individual common goods has merged and passed into the trusteeship of those who neither appreciate their significance and importance to local communities, nor care particularly about their management. In recent years, I personally have been aware of instances of failure to manage common goods properly in three towns, principally because of lack of local knowledge.

"There is no doubt that the edict from the Scottish Government to Local Authorities to compile lists of common good assets opened several cans of worms, with delay upon delay in reporting entirely due to the failure to maintain proper records. In Hawick, that list has only now been completed, completion only being achieved thanks to the assistance of several civic groups in the town.

"Part of the problem with incomplete records is that the intentions of the original donors may not have been properly interpreted. Financial assets present their own problem in that these are very often swallowed up, often without trace, into Council coffers. Indeed, I suspect that if all common goods asked for their monies back simultaneously it would spell financial disaster for many local authorities. The merging and management of “joint” common good funds into single investment portfolios clouds the issues of management fees charged and apportionment of dividends (and losses).

"On one occasion I even heard local council talk of a proposal to allow borrowing in excess of investment from such joint portfolios. Fortunately, those with an interest and knowledge prevailed. Common goods are a diverse subject and have been the subject of diverse management over the years. Many have been frittered away or spent to suit council budgets with little reaction from the communities involved. 

"However in towns with a strong sense of community and appreciation of custom and tradition, common goods are a precious commodity to be jealously guarded not by sentiment, but by structure. Politicians ignorant of such structure are neither qualified, nor able, to analyse the present or shape the future. 

"As local government becomes less local, and the pen grows ever mightier than the sword, the intensity of the community fight to protect its rights and common should not diminish. Management should be devolved to appropriate civic bodies whose trustees are town dedicated councillors, community councillors, and representatives of appropriate local organisations."

TO BE CONTINUED....

SBC contractors all washed up

EXCLUSIVE by DOUGLAS SHEPHERD

The dissolution of the insolvent New Earth Solutions Group - the waste management contractor hand-picked by councillors in the Scottish Borders for a "ground-breaking" treatment project - may herald the end of a dark chapter in the area's local government history.

A decision by the Group's administrators Duff & Phelps to end their involvement with NESG has been published on the Companies House website, indicating it is intended to conclude the administration by way of dissolution.

New Earth's debt mountain together with their failure to deliver the urgently needed £23 million treatment facility for Scottish Borders at Galashiels is probably how the bankrupt firm will be best remembered.

But the role of elected members on Scottish Borders Council in a scandal which saw £2.4 million of taxpayers' money squandered (mainly on expensive consultants) for absolutely no return will not be forgotten either.

Their decision to sanction a completely unproven brand of technology, and to rely on an offshore investment fund - New Earth Recycling & Renewables (NERR) - to come up with the cash for the scheme proved catastrophic.

Unfortunately no-one will be held to account thanks to the lack of interest in the debacle by Audit Scotland, the public spending watchdog which allowed SBC to write off their losses without offering a public statement outlining the factors behind their mismanagement of public funds..

The Final Progress Report to NESG creditors outlines the various debts owed by the Group which appears to have been insolvent long before Borders council pulled the plug on a 24-year contract.

Even the Co-op Bank, a secured creditor owed £41.8 million, has not been reimbursed in full because of "insufficient realisation" to pay.

And although NESG and NERR were inter-linked, the contractors owed the Isle of Man-based fund £39 million at the time of the administration process being instigated for quasi-equity funding. The report states: "There is no prospect of any distribution being made to NERR under its security".

Dozens of unsecured creditors who were owed a total of £9.1 million have received payments equating to 1.5 pence in the pound.

Duff & Phelps' fees for the administration total more than a quarter of a million pounds. In the case of NESG the administrators will be paid £194,740 (748 hours at an average hourly rate of £260). And the fees for New Earth Solutions Facilities Management, which ran the operational treatment plants amount to £90,455 (302 hours at an average of £299.

Duff & Phelps say: "The joint administrators consider they are now in a position to conclude the administration and cease to act. It is intended to exit the administration by way of dissolution."

The insolvency experts have filed a report to the UK Government regarding the conduct of the directors of NESG in the three years prior to administration, but the contents of that report remain confidential.

The end of NESG follows the news earlier this week that Premier Group (Isle of Man) which ran the NERR fund and is also in the process of being liquidated had had its licence to practice revoked by the Manx financial services watchdog for breaches of regulations and failure to pay money due to the authority for the licence.

Council's offshore "funders" have licence revoked

EXCLUSIVE by EWAN LAMB

Premier Group Isle of Man which ran the fund chosen to bankroll Scottish Borders Council's £23 million waste treatment facility has had their licence to practice revoked by Manx. financial regulators for breaching regulations.

Not Just Sheep & Rugby has already revealed how Premier Group collected tens of millions of pounds in fees for controlling and managing New Earth Recycling & Renewables [Infrastructure] Fund (NERR) while that fund was involved in the disastrous Borders project alongside contractors New Earth Solutions Group (NESG).

Research has shown that NERR was never in a position to put up the cash for the combined Mechanical Biological and Advanced Thermal Technology plant at Easter Langlee where a landfill site is due to be closed down next year.

The council scheme also collapsed because of technical issues...in other words the form of technology approved by elected members was unable to function. But the loss of £2.4 million of taxpayers' money on the failed venture was blithely written off with no public explanation.

Since then Premier Group has plunged into liquidation with a similar fate for NERR whose 3,250 investors are almost certain to get none of their money back. At the same time NESG is in administration following the revelation it had debts of more than £150 million.

Now the Isle of Man Financial Services Authority (IOMFSA) has confirmed that Premier Group (in liquidation) which was licensed under the island's financial regulations has had its licence revoked with effect from December 6.

Premier, whose managing shareholder is Premier Group Distribution Inc. (PGDI) registered in the British Virgin Islands, had already ceased trading, but IOMFSA was not able to accept the surrender of the licence, according to a statement issued by the regulator.

The statement, which sets out the reasons for revoking the licence, cites the following: "Audit requirements including the provision of audited financial statements for the year ended December 31 2016 of the Financial Services Rule Book have not been met.

"Premier Group has not discharged amounts it owes to the Authority in respect of the last annual licence fee and certain administrative civil penalties".

Yet Premier Group claimed when liquidators were called in that it would meet all of its financial obligations.

IOMSA's statement added: "Under Rule 8.57 (8) of the Financial Services Rule Book the Authority may require a licence holder to hold professional indemnity insurance (PII) cover in respect of claims arising from past acts or omissions.

"The Authority would expect a licence holder such as Premier Group to take steps to hold appropriate PII but Premier Group has not been able to achieve this".

Meanwhile NESG administrators Duff & Phelps have given notice to Companies House of their intention to move NESG from administration to dissolution. Details of the notice are expected to be made public during the next few days.

It seems that in the not too distant future all of the businesses and funds chosen by Borders councillors for their "cutting edge" waste treatment project will cease to exist. And yet none of this warrants an investigation by Scotland's spending watchdog Audit Scotland.

Police raid council's Belgian bankers

EXCLUSIVE by DOUG COLLIE

The offices of the Belgian state bank which holds six separate loans taken out by Scottish Borders Council over a decade ago was raided by police this week as part of an investigation into allegations of tax avoidance by companies exposed in the so-called Panama Papers.

Belfius Bank - formerly known as Dexia until the institution had to be rescued by Belgian taxpayers in 2008 - has its headquarters in Brussels.

Six out of eleven LOBO (lender option borrower option) loans drawn down by SBC during 2004 and 2005 are with Dexia Bank. Three were for £3 million each while the three others were for £5 million each. Full details of the controversial transactions were revealed in Freedom of Information requests during 2015 and 2017.

The Dexia portfolio is now valued at over £38 million with the council not due to clear this aspect of its outstanding debt until 2054 and 2065 respectively. Interest rates on the loans range from 3.75% to 4.5%. Critics of LOBO loans claim councils throughout the UK were wrongly advised to borrow from foreign banks by treasury consultants who collected fat bonuses for arranging the credit.

Dexia was one of the "banks of choice" when LOBO loans were being set up in the early years of the Twenty-first Century.

Reports in the Belgian press and media this week say that the Dec.5th raid on the bank followed last year’s revelations that Belfius’former subsidiary, Experta Corporate and Fund Services, had been a prominent client of Mossack Fonseca, the Panamanian law firm at the centre of the Panama Papers probe based on 11.5 million leaked files.

Last year we revealed SBC's other links to Mossack Fonseca. The company in control of the council's bankrupt waste management contractors New Earth Solutions was registered at the law firm's offices in British Virgin Islands.

Experta, a tax consulting firm, helped to establish hundreds of offshore companies on its clients’ behalf, allegedly taking advantage of lax reporting requirements for foreign accounts, according to the Belgian news organisations.

The Panama Papers revealed that Experta requested the Panamanian law firm set up 1,659 offshore entities for clients in Belgium, France and Germany. Most of the companies have since closed.

Experta, whose services range from accounting and tax advice to financial planning was a unit of Dexia Group — the Franco-Belgian bank later renamed Belfius — until 2011. That year Experta was sold to Banque Internationale à Luxembourg.

Directors of Dexia, the former parent bank, included Belgium’s ex-Prime Minister Jean-Luc Dehaene, and authorities are now investigating what role the bank’s managers played in the tax avoidance schemes.

Media commentators claim the raid at the Brussels headquarters of Belfius signals that, after months of investigation by the federal police anti-fraud unit, Belgian authorities have begun to close in on the most active players in the offshore advisory business. 

On Tuesday Belgian officers seized computers and files documenting Dexia and Experta’s business operations, the Belgian press reported.

A Belfius spokeswoman told local media that the bank is cooperating with the investigation.

In the aftermath of the Panama Papers revelations, politicians criticised Experta for enabling tax avoidance, and possibly helping clients hide funds, even after its former parent Dexia had been rescued by the $3.7 billion government bailout in 2008.

“It is inconceivable for a financial institution, which has been supported by taxpayers money, to become involved, actively or passively, in tax evasion on such a scale,” said Finance Minister Johan Van Overtveldt last year, according to Belgian media.