When is a council asset not an asset?

” … If you didn’t know your local council had become a trader in gardening services, you may be even more surprised to learn it has turned into a property trader, buying up shopping centres, business parks, office blocks, hotels and garages. In 2016, local authorities spent over £1bn on real estate. [EDDC will be doing this when it funds its new Honiton HQ].

You may think this is a peculiar state of affairs when councils are simultaneously selling assets to mitigate budget shortfalls. But the arithmetic is simple. The Public Works Loan Board, a statutory body established in 1793, will lend at 2.5% interest. Property assets will yield at least 4.5% and often far more. The result is that local councils are becoming significant players in the UK property market, causing the Financial Times columnist John Plender to warn of its “creeping nationalisation”. Canterbury’s Whitefriars shopping centre (Kent), Sutton Coldfield’s Red Rose shopping centre (Birmingham) and Sunbury’s BP Business Park (Surrey) are all owned or partly owned by a local council.

Municipal enterprise is nothing new – councils sold local gas supplies in the Victorian era, and Joseph Chamberlain, Harold Macmillan and Anthony Crosland all proposed an expansion of municipal trading. But until recently, such opportunities were strictly limited by legislation that, for example, restricted them to trading only with each other. New Labour gave them explicit permission in 2003 to trade “ordinary functions” for a “commercial purpose”. In 2011, the coalition government’s Localism Act allowed them to do whatever they liked unless specifically prohibited by law. Now councils, having been forced to relinquish their roles as landlords of inexpensive housing for local people, re-emerge as landlords of multinational stores.

The dangers are obvious. If the property market were to crash, councils would be saddled with assets of dubious value. Moreover, it seems strange that, after deeming them incapable of running schools, Tory ministers are now happy for councils to manage investment portfolios covering areas of which they have little experience. But it is all part of the neoliberal vision for the world.

Boundaries between public and private sectors are being blurred. Since 1990 companies have been allowed, in effect, to bribe councils with payments for improved roads, new schools, high-street facelifts and affordable homes in return for planning permission. It is another step along the same road for the council itself to become a company and/or a property developer. Just as the state was omnipresent in the Soviet Union, stamping out entrepreneurial instincts, so the market becomes omnipresent in our society, sweeping away the ethos of public service. …”

https://www.theguardian.com/commentisfree/2017/mar/06/councils-local-authorities-bankruptcy-public-service

One thought on “When is a council asset not an asset?

  1. Proposals for EDDC’s own property company are being discussed/approved at Cabinet this Weds March 8th. One might indeed wonder whether they have the expertise in house to run this kind of business and whether it is what we expected our Councillors and Officers to be doing. Given their management of Exmouth and relocation so far we should be worried. There are hugh risks here….. oh, but it’s OK because the risk is owned by us as council tax payers and not by any of them.

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