Devon County Council’s senior councillors are being urged to gamble up to £30million on the rising property market to help make up for Government cuts.
They are also advised to put Barclays Bank back on its approved list of “counterparties for lending” , despite its recent downgrading in the light of new banking rules.
The ruling executive will next week consider a report recommending they sanction an investment in the Churches, Charities and Local Authorities) Property Fund (CCLA) instead of bank deposits.
The CCLA fund currently has investments of over £300 million, with over 100 local authority investors including Plymouth City Council and four Devon town councils.
A report to the cabinet meeting points out the “risk” that property value could go down and that with charges a 3% rise in the market would be required for the authority to break even.
“This means that any investment would need to be medium to long term, a minimum of 2-3 years” the report said.
“Capital growth would need to be around 3% per year to ensure that the capital redeemed at the end of the investment was at least equal to the initial amount
invested,” it added.
Finance officers at the council calculate that a £30 million investment “would have the potential to yield up to £1 million additional investment income in 2016/17 and 2017/18 to help offset the budget pressures facing the council”.
But it also represents “an increased risk of loss of capital in comparison to the use of term deposits with banks and building societies”.
East Devon Watch 