On the 13th of December 2018, James Brokenshire, a Conservative Minister of housing, communities and local government, made an important speech in Parliament: He made it clear that he was aware that some councils were borrowing for commercial purposes (property speculation), he shared the concerns of CIPFA as to the risks that those councils are exposing their tax payers to. The money pot that the lending comes from is that of business rates levy surplus, i.e. from British based businesses across the country.
The worst offenders and the amounts they have borrowed are Spelthorne (£1 Billion), Woking (£830 Million), Runnymede (£526 Million) and Eastleigh (£363 Million). These Conservative Councils are buying various properties around the country, e.g. office blocks, with the purpose of using the rental income to provide services.
Some readers will remember the scandal of 2008 when £1 Billion of British councils money was invested in Icelandic Banks which then failed in the world crash. The British tax payer bailed out the 90+ councils that were involved then ultimately Iceland reimbursed us 8 years later but the fact that certain councils were willing to expose their local tax payers to such risk was careless of public money: It was resident’s money paid in good faith for the provision of services not for speculation. In 2008 the total amount of money at risk was lower and spread across many councils but now the risk is building again and this time it is concentrated in specific areas where failure would hit residents hard.
Ask yourself who would bail out councils if the rental income from large properties dried up but the loan payments still had to be made? Initially local residents would have to pay more council tax to pay both for the loan repayments as well as the shortfall to fund commissioned services. Alternatively the Government could step in but we know that the main place the Government get funds from is from us through general taxation! Either way it is you and I on the Clapham omnibus that will pay for ill advised borrowing and investments.
The commercial properties that have been bought by councils include many office blocks. Personally, if I had a few £ Million to invest I would not be listening to promises of 5% interest and a guaranteed income, has nobody noticed the number of companies taking their HQs abroad? There are 1 or 2 every week, this week it is Sony and Dyson. certain office blocks in Runnymede have already stood empty now for a couple of years. Property speculation is an activity that has a risk and speculating councillors should remember that investments can go down as well as up.
Fiona is the only Labour Councillor at Runnymede Borough Council.