Government to probe £72m Plymouth City Council pension deal

Plymouth City Council invested £72m in 2019 with the aim of reducing the council's pension deficit

The government has ordered an investigation into a council's £72m pension deal.

Plymouth City Council borrowed £72m from the government in 2019 to invest in a company with the aim of reducing the council's pension fund deficit.

The government investigation will scrutinise any fees paid and any relationships between company directors and council staff and members.

The council leader said he welcomed the investigation.

Simon Hoare, Minister for Local Government, wrote to Tudor Evans, Labour leader of Plymouth City Council, on 27 February but the letter has only now been seen by the BBC.

In the letter, Mr Hoare said: "I have significant concerns around the decisions and circumstances that led to your council undertaking a transaction that auditors have now clearly concluded is not in line with normal accounting practice."

The minister said the pension transaction would be "subject to a detailed independent investigation" which would explore "the novel arrangements to circumvent accounting principles".

Plymouth City Council is facing an investigation into a financial transaction in 2019

The government said the investigation would look into any fees paid by the council to two companies.

It said it would also examine any relationship between the companies and their directors, and the council, its officers, and elected members.

Mr Hoare said the investigation would need to be completed before the government signed off an application by Plymouth City Council for what is called a capitalisation redirection of up to £72m to enable the council to set a balanced budget for 2024/2025.

Records on Companies House show one of the companies involved paid a dividend to shareholders in October 2019 of just over £1m and a further dividend in October 2020 of £218,200.

Leader of the council, Tudor Evans, welcomes the investigation

Council leader Mr Evans said there was nothing new in the government letter.

He said: "We're quite open about this and transparent.

"We welcome the investigation - it's another opportunity to put our position on record.

"We've saved loads of taxpayers' money already and will continue to do so through this deal."

Richard Bingley said a "formal independent investigation" was needed

Richard Bingley, Conservative member for Southway and former leader of Plymouth City Council, said he had been unable to find out detailed information about the pension transaction.

He said: "When we asked for information it was either inaccurate or it was stonewalled."

Mr Bingley said a "formal independent investigation" was needed to "get to grips" with what had happened.

He said: "This is not about politics - it's about the truth and it's about public money."

Plymouth City Council said the pension deal "involved capital borrowing to significantly reduce the ongoing cost of a pension deficit to council's revenue budget".

The council said in a statement: "This enabled the council to make more than £9m savings to its revenue budget because paying the interest on the loan was cheaper than paying the deficit every year."

Elections are being held for one third of the seats on Plymouth City Council on 2 May.

Julian Brazil, the Liberal Democrat parliamentary candidate for the South West Devon constituency, said: "We welcome the investigation and if there's nothing to hide then let's move on.

"If we do find there are any irregularities then that's not acceptable."

A spokesman for Plymouth Green Party declined to comment.