Local authorities to be banned from investing in commercial property such as offices and shopping centres.
By Staff Reporter
Local authorities are to be banned by the Treasury from investing in commercial property such as offices and shopping centres.
THE practice is being reviewed as part of a consultation into the role of the Public Works Loan Board, which some local authorities have used as an easily accessible source of financing for their property sprees.
While the consultation is not due to finish until July, the Treasury said on Wednesday that it wanted to see an end to the investments – which have resulted in some local authorities becoming dependent on rental income to fund services.
A spokesman said: “Our starting point is that local authorities should invest public money in regeneration, housing and delivering services, not in speculative commercial investments which can put local and national taxpayers at risk.”
Over the past two years the Bureau’s investigations have repeatedly raised the issue of local authority investments, including being mentioned prominently in a select committee inquiry and prompting an investigation into the topic by the National Audit Office (NAO). In a story published alongside The Times on Saturday we reported the investments had been “battered” by the coronavirus crisis, after shops and offices were closed due to the lockdown.
Since 2010, government funding for councils has been halved, with £15bn lost to cuts. As revealed by the Bureau, the number of councils investing in property doubled in the space of two years. A recent report by the NAO said councils had spent £6.6bn on commercial property since the end of March 2016. Across the country, council services – many of which are now on the frontline of the battle against Covid-19 – have been tied to the vagaries of the property market.
Some councils are heavily dependent on income from property investments to provide services. Woking borough council in Surrey reported a month before lockdown that its investment and rental income was the equivalent of 88% of its budget for services. Next year that figure was predicted to rise to 98%.