It never ceases to amaze me how little Government understands the challenges facing local government. Unlike central government bodies, councils must set a balanced budget each and every year. They must also retain a prudent level of reserves to cover unexpected events and financial uncertainty both in terms of their direct revenue and the impact of the wider macro-economic position.
The majority of Councils who have decided to invest in property have done so to create long term revenue streams to replace lost grant funding. It is entirely appropriate that any such investments should be subject to appropriate scrutiny by members and be authorised by the Section 151 officer and the Monitoring Officer. It is entirely unhelpful to try and stifle this demonstration of innovative thinking to placate either the media or certain lobby interests.
Councils are under severe financial pressure and have clear statutory obligations. As Councils have a duty to comply with the law over balanced budgets and must also provide statutory services which are subject to exacting quality inspections, they must find ways to fill the gap. Investment income from property is a key plank of this strategy for many councils. As long as the governance and accountability is strong - this creative thinking should be supported not stifled.
Proposed government guidance on council borrowing could have “serious negative consequences to council finances and ultimately services” if implemented in its current form, the Local Government Association has warned. Responding to the Department for Communities & Local Government’s consultation on revisions to the Local Authority Investment Code, the LGA says concern over the impact of the guidance is already causing problems with setting council budgets for 2018-19