Southend council to gamble £20m on commercial property purchases in bid to replace government funding cuts

Southend council has put forward plans to stake £20m of its budget on the property market in order to replace the lost funding from central government.

In its draft budget proposal for 2019-20, Southend-on-Sea Borough Council unveiled £35.3m of new projects and set out how it will use capital to make up lost funding from the government grant, which the council says is being slashed by 42% in April.

The local authority’s plans include committing £20m for commercial property purchases over the next three years as Southend aims to build a property portfolio.

New investments have also been announced, such as £26.3m into improving roads and pavements, and an £18m investment into renovating Southend’s pier but the council needs to make an extra £4m following the government cuts.

The returns from purchases made in commercial property are invested back into council services, and will aim to prevent larger rises in council tax and cuts to jobs and services as seen at other councils across the country, especially when the government grant is cut completely, potentially next year.

Council investments like these have proved controversial in the past as they put public money at risk, and in November CIPFA publicly warned against local authority’s exposing public funds to “unnecessary or unquantified risk.”

CIPFA shared its concerns over the “acceleration of the practice of borrowing to invest in commercial property” and reminded councils that the prime objective of council’s investment activities is the security of funds.

Southend council leader John Lamb said: “We are not going to make a fly-by-night decision on the investments.

“This is done carefully to see if it worth investing and whether we will get a return, whether it makes sense and how the market is.

“If the government doesn’t want us to make these investments so we can secure our services then they must stump up the money to make sure we can do it through them.”

Over £20m is also being added to Southend council’s capital programme from 2021 to 2024 for investment in the council housing stock, which will be funded through the housing revenue account.

If all external funding and business cases are approved, Southend’s capital investment programme could be £229m for the period of 2019-20 to 2023-24.

Lamb added: “Many councils have made these investments over many years, we are doing it and we’ve got some very good investments.

“I think the actual investments we’ve made so far are showing us a good return.”

Most recently Tees Valley Combined Authority mayor Ben Houchen announced a £40m deal to bring Durham Tees Valley airport back into public ownership using the authority’s investment fund, but the buyout was criticised by some council leaders as risky and a “vanity project.”


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