Latest news with #AbundanceInvestment
Telegraph
17-03-2025
- Business
- Telegraph
Councils begging for your savings isn't a net zero innovation – it's an embarrassment
In an attempt to plug the ever-increasing funding gap, bankrupt-adjacent local councils have dusted off the begging bowl and covered it in tinsel. Under the guise of investment, Green-led Bristol has become the latest council to offer what smells like a voluntary council tax to fund responsibilities that should be met from their existing budgets. Considering the rise in council tax may as well be an annual guarantee – with Bristol one of many councils this year imposing the maximum 4.99pc increase that can be demanded without triggering a referendum – one might argue residents should expect the LED lighting budget across council offices to be met by the thousands of pounds a year they pump into these coffers. But in a demonstration of phenomenal gall these local bodies have launched their own Kickstarter for Councils, asking not only their residents, but anyone across the country, to foot the net zero bill – in exchange for below-market returns. These green bonds can be found on Abundance Investment, a platform that facilitates these loans for a slice of the pie – 0.75pc of the total sum raised alongside an annual 0.2pc fee. The website proudly declares that it offers investments with councils 'in a solid financial position', despite Bristol councillors declaring just two months ago that the body faced bankruptcy if it can't close its £52m funding gap. But Abundance also notes that councils can't go bankrupt, and that's just misinformation spread by 'the media'; councils only issue a Section 114 and may possibly delay your repayments. Technically true, but it doesn't entirely reassure when Tony Dyer, leader of Bristol City Council, himself used the word 'bankruptcy' multiple times in his statement on the matter in January. But if this unique set-up means investing in councils has a significantly low risk, as the platform claims, why has it confirmed it prevented several councils from issuing these sorts of loans? More unsettling still, buried in the small print is the revelation that none of this is covered by the Financial Services Compensation Scheme, meaning if Abundance goes bust, hey ho, there goes all your cash. Understandably, you might be getting cold feet by now and thankfully Abundance offers a resale platform. They won't buy it off you, but you can put the bond up for sale on a peer-to-peer marketplace in the hopes somebody will take your poor-paying investment off your hands. How many are currently available for purchase? 13. Not exactly a vibrant community. Okay, James, but these are one-off investments used to fund the future. Once repaid they'll certainly be consigned to history. Hammersmith & Fulham is on its third round of fundraising via this platform. Government doesn't have a great track record of abandoning forms of taxation once proven to work. Now, despite all this, I do have sympathy with the council funding issue. They have been forced to take onto their books enormous swathes of spending that should be budgeted by central government, with care costs swallowing up gigantic sums of money before the local bodies are able to allocate a penny to collecting your bins. But the answer cannot and must not be begging residents within and without their borders to add just a little more money for a little more time (you can 'invest' from as little as £5) and then once that cash has been returned, to ask for just a little more again for just a little longer. The platform even confirms that some investors have been generous enough to donate their interest payments back to the councils. Right now you can find five-year cash Isa bonds paying more than the 4.2pc interest on offer from these green bonds, without any of the uncertainty – and coming with valuable FSCS protection. Innovation means deterioration. So wrote The Telegraph's own Patrick Hutber decades ago, and the once-City editor's words ring as true as ever. This latest in a long line of papering over the cracks with something shiny stands as one of the most embarrassing.
Telegraph
17-03-2025
- Business
- Telegraph
The cash-strapped councils eyeing up your life savings to cover net zero bills
Cash-strapped councils are asking taxpayers to invest their savings in projects to help them meet their net zero targets. Bristol and Hackney, which have both warned of severe funding shortfalls, have become the latest councils to launch investment schemes to help fund their environmental initiatives. The schemes invite taxpayers to invest in exchange for 4.2pc annual interest across a five-year term. But experts said the deals risked 'clear trade-offs' in terms of returns and protection for investors. So far, 238 taxpayers have collectively saved £175,750 in the Bristol Climate Action Investment. Green-led Bristol, which has warned of a £52m funding gap, said the money raised would help fund heat pump installations, solar panels and energy improvements in its own offices. Meanwhile, 103 have invested £128,345 in Hackney Council's green projects, including funding energy efficiency improvements at a local school. Hackney councillor Robert Chapman, said the scheme provided a 'cost-efficient way for councils to finance climate action'. In total, 15 councils have launched the investment products, according to Abundance Investment, the financial provider. The schemes are advertised as 'low risk' as there are legal controls in place to prevent councils defaulting on their debt. No council has ever failed to repay their loans, according to Abundance Investment, including those who have issued Section 114 notices, effectively declaring themselves bankrupt. Abundance Investment says on its website: 'If a council did have financial difficulties, it's possible it may result in a delay to repayment, but this is unlikely to result in any failure to pay the interest owed.' But investors could face issues getting their money back if the council did run into trouble. This is because the investment is a peer-to-peer loan, and is therefore not eligible for the Financial Services Compensation Scheme (FSCS), which can protect up to £85,000 of your deposit if the provider goes under. Savers could also lose money if they decide to sell up. Investors must sell on a secondary market, and there is no guarantee they will find a buyer. Darius McDermott, of financial advisers Chelsea Financial Services, said: 'While these schemes may appeal to those who want to make a direct local impact with their money, they come with clear trade-offs in return, protection, and liquidity. If you want to invest in renewable infrastructure, investment trusts are a much stronger option. 'Renewable infrastructure investment trusts offer higher yields, are fully regulated by the FSCS and FCA and, crucially, are extremely liquid. If you need access to your money, you can sell your shares at market price, whereas these council schemes lock up your cash for five years.' Mr McDermott also said that a 4.2pc return was 'underwhelming' considering interest rates currently stand at 4.5pc. Abundance Investment also said a number of investors had chosen to give their interest back to their local council in order to further support their work. Jason Hollands, of investment platform Bestinvest, said: 'While some people may simply relish the idea of helping their local council out with funding green projects, as an investment these schemes aren't tempting. 'The principle of caveat emptor – buyer beware – certainly applies here as these schemes have a five-year term and you may not be able to access your capital prior to that. There is also the potential for losses too.' Net-zero funding shortfalls As many as 300 councils have declared a climate emergency, despite their significant role in helping the Government meet its net zero carbon ambitions by 2050. Under the Paris Agreement, emissions must drop by about 45pc by 2030 and reach net zero by 2050 in order to limit global warming. However, last year, a poll from the Local Government Association found that two thirds of councils were not confident in hitting their climate targets, often citing bureaucracy around securing government funding. Many councils have signalled they will increase council tax this year by 4.99pc, the maximum without triggering a referendum. Bristol Council has warned it faces bankruptcy if it does not plug a £52m funding gap over the next five years. Meanwhile, Hackney was forced to draw £10m from its reserves to fund services this year. Abundance Investment said it carries out credit checks to avoid arranging a loan for a council that might issue a Section 114 notice, leaving the investor at risk of a loss. It said this process had resulted in several councils not proceeding to issue loans. Councillor Martin Fodor, chair of Bristol Council's Environment and Sustainability Committee, said: 'Bristol was the first UK city to declare a climate emergency and to set a city-wide ambition to be carbon neutral by 2030. This is a complex task and an ambitious vision that needs large amounts of investment in our homes, buildings and energy infrastructure.' But the TaxPayers' Alliance (TPA) campaign group described the council's attempt to use taxpayer cash as 'desperate'. Elliot Keck, of the TPA, said: 'Bristol council's desperate attempt to tap up taxpayers to fund their ruinous net zero drive paints a humiliating image of just how badly things are going wrong at that town hall. 'This is the same council that until recently was considering moving to four-weekly bin collections, a move that would have made life miserable for their residents.' Councillor Robert Chapman, cabinet member for Finance, Insourcing and Customer Service at Hackney Council, said the scheme would help the council deliver on green projects. He said: 'We know many residents share our ambitious climate goals and want to help us deliver local climate projects for a greener, healthier Hackney. This framework provides a cost-efficient way for councils to finance climate action and for local people to invest in green projects that bring tangible benefits to the environment and their community. 'Like all local authorities, rising costs and increasing demand on services like social care and housing mean we face difficult decisions as we manage competing priorities, but we remain financially resilient.' But Mr Hollands of Bestinvest urged investors to proceed with caution. He said: 'Unlike a cash savings account from a UK bank, investments made into these schemes are not covered by Financial Services Compensation Scheme, which provides some protection for depositors in the event of a collapse. 'For what is fundamentally an illiquid scheme, the return on offer – an interest rate of 4.2pc per annum – is also lower than the current 4.30pc yield available from five-year Gilts. A Gilt will also be much more tax efficient than these loans, as much of their 'yield' will represent a tax-exempt capital gain if held to maturity.' A spokesman for Abundance Investment said investors are aware of the risks and are given a two week cooling-off period in which they can change their mind. A statement said: 'Abundance Investment works hard to make sure investors understand both the benefits and risks of these types of investments. 'Community Municipal Investments can play a valuable role in a portfolio providing an Isa-eligible investment that offers a competitive stable income and a positive impact in a community that is relatively low risk. 'Our investors understand that in these challenging times both nationally and globally putting their money to work to help communities in the UK is a powerful thing to do.'
