Perhaps we shouldn’t be allowing councils to borrow then?

Britain’s councils are making multi-billion-pound bets on commercial property as they try to replace revenue lost through government cuts, an investigation by The Times has found.

Local authorities are taking out loans to buy shop premises, offices and business parks despite having little or no investment experience, raising concerns that services will have to be reduced if the property bubble bursts.

Councils have paid £2.7 billion for commercial properties since 2015, up from £500 million over the previous three years, freedom of information requests show. Experts warn that some are building “exceptionally risky” portfolios. Spelthorne district council, a small authority in Surrey, has invested £422 million this year, or £10,600 for each household in its borough.

Hmm. Perhaps it’s possible to be too Curajus, you know?

18 comments on “Perhaps we shouldn’t be allowing councils to borrow then?

  1. Wasn’t there a proposal that councils should by land, grant it planning permission and then sell it to make a profit? They could do that with a lot of high street shops where it seems to be change of use restrictions that stop them being turned in to housing so they lie empty until the next mug comes along thinking they can turn a quick profit and bankrupt themselves.

    There’s more than a few run down office parks as well. Round here a landowner built some business units that haven’t had one tentent in the 7 years we’ve lived here.

  2. I thought they weren’t allowed to borrow? That’s the excuse they always give for not building any new council houses.

  3. Andrew,

    IIRC they were specifically barred from borrowing or using the sale of council houses to build more council houses.

    Probably a response to the threat to build the Tories out of London.

  4. BiND – yes there was, from the Adam Smith Institute no less. A plan to nationalise planning gain. After all, no point in the council granting me planning permission when it can buy the raw land, grant permission and then sell.

  5. BTW The Times is claiming this article is the result of its investigative reporting but almost exactly the same article was in the FT on April 26th.

  6. I’ve come to hate the word “investment. It seems to be applied to everything from day to day spending to outright gambling, these days.
    We really do need a new word. Something that implies the people using it know what they’re doing.

  7. Well if they can’t deposit their cash in Icelandic banks, what are the poor councils to do?

  8. “revenue lost through government cuts”: I need an explanation. The Many complain about govt cuts, and then The Few point out that there haven’t really been any, at least overall.

    So which bits of the “public sector” have been subject to cuts and which bits have been having more loot lavished on them?

  9. It isn’t just about buying the bloody real estate it is about ensuring tenants pay, that credit controls are in place etc etc. Wont happen.

  10. Councils can put up council tax. They can put it up as much as they like too but an annual rise above 4.99% (IIRC) requires a local referendum first. Councils don’t want the scrutiny of spending & policy that would bring.

    One of the things councils have been moaning about is social care funding. As a result of this Osborne introduced a potty mechanism for increasing it. Councils can additionally increase tax bills by 3% as long as the increase is ring-fenced for social care funding. And on your council tax bill they are required to show *2* years’ worth of social care funding for no obvious reason.

    Fullfact.org: Council tax and social care: explaining your bill

  11. The Meissen Bison beat me to it (by, er, several hours).

    Councils have been gambling away other people’s money through unwise investments for years. Linking it to ‘austerity’ is just another example of the media (even the Times, ffs) dancing to the hard left’s tune.

    Maybe people will start to get the message when servicing the nation’s debt costs more than the NHS. Probably not, though.

  12. Odd, my council has been *selling *off* it’s income streams to get one-off capital gains. Then a couple of years down the line complaining it’s spent the money and also doesn’t have the income any more.

  13. @ BiND
    NO – they were specifically barred from spending the proceeds of selling coulcil houses *except* to repay attached debt or to build new council houses.
    The original plan was that the money from sales would be used to build more council houses but HM Treasury inssted that attaching debts be repaid first.

  14. Not sure about councils investing in commercial property but why shouldn’t they team up with some of the many REITs involved in social housing? The council provides the funds, the land and the planning permission, the REIT gets the houses built and manages them

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