LGPS at heart of UK growth proposals

In its belief that the LGPS can contribute to local growth, the government has put forward measures to require LGPS administering authorities to work with local, mayoral and strategic authorities to identify local investment opportunities, and to also have regard to local growth plans and priorities when setting their investment strategy.

However, the government is currently proposing that it would be for the LGPS pools to carry out due diligence on local investment proposals, to make the decision as to whether or not to invest in these opportunities, and to manage such local investments. LGPS pools do not face quite the same potential conflict of interests as LGPS administering authorities when it comes to deciding on local investments and since the LGPS pools cover a wider geography than individual LGPS administering authorities, the LGPS pools are also able to reduce risks from over-concentration of investments in a specific locality. 

Facilitating local investments can be resource-intensive, not only in carrying out diligence on suitable local opportunities but also in implementing the investment and monitoring the asset over time.  Given that LGPS administering authorities may not have the capacity to undertake this additional work, the government has determined that LGPS pools would be better placed to provide a more centralised source of investment expertise to assess, commit to and manage local investments. LPGS pools could, we believe, drive local investment growth by leveraging the experience and knowledge of administering authorities that already allocate to local investments alongside the in-house expertise of the LGPS pools and specialist external managers.

The government has further proposed that LGPS administering authorities include in their annual report details on the extent and impact of their local investments. Such a proposal will increase transparency and allow LGPS members to see local projects which have been facilitated by their own LGPS. Although accountability in this way is to be encouraged, it is hoped that the final reporting requirements will be proportionate and not create unnecessary cost and/or governance burdens on administering authorities.