Councils face ban on property investments

Local authorities are likely to be banned from investing in commercial property for the purpose of boosting revenues.

Louisa Clarence-Smith 
An inquiry by MPs into the £6.6 billion spent by councils on commercial property in the past three years asked how officials were controlling risks to their financial sustainability. Minutes of last week’s public accounts committee hearing were released yesterday.

Jeremy Pocklington, permanent secretary at the Ministry of Housing, Communities and Local Government, said: “A consultation has been launched by the Treasury. In future, assuming that we implement the proposals set out in the consultation, councils will be prevented from investing in commercial property and from accessing the Public Works Loan Board. That, we think, will stop councils not only borrowing, in particular, but investing in these sorts of commercial property arrangements that are primarily for yield.”

Councils are still expected to be permitted to invest in their local areas for regeneration purposes.

The £6.6 billion invested between 2016 and 2019 was 14 times more than in the previous three years as councils sought alternative sources of income to fund public services, the inquiry heard. Families could face higher tax bills and reduced public services as the coronavirus leads to a collapse in rental income from the properties.

The Treasury is expected to make a final decision in July.

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