Northamptonshire’s County Council’s financial turmoil has “triggered” greater public scrutiny around local authority finances but CIPFA’s updated guidance aims to prevent this, an institute conference was told.
Addressing delegates at CIPFA’s treasury management conference on 31 October, Don Peebles, head of CIPFA UK policy & technical, noted the pressure council finance officers now find themselves under.
“Local government finance was never near the headlines when I got into the field- that is not the case now,” he said.
Peebles said CIPFA’s updated guidance on commercial property investment would be designed to “help councils find their way through all the challenges”.
CIPFA released a statement on commercial property investment financed by borrowing which said: “Local authorities must not borrow more than or in advance of their needs purely in order to profit from the investment of the extra sums borrowed”.
Peebles reiterated this point and said: “There are some local authorities who are investing quite heavily in commercial property.
“This guidance sets a marker down for where we hope authorities will be. There are a number of local authorities who will not be there – they are taking out too much debt.”
Going forward, Peebles said that there might be a need to define exactly “what proportionality looks like”.
That is an acceptable amount that authorities can borrow to invest in commercial property would be.
Peebles clarified that borrowing in advance of need is against CIPFA’s principles and the key objective when managing public money should be to protect it.
Figures from the Ministry of Housing, Communities and Local Government released earlier this month showed that the largest investors in commercial property were Spelthorne Borough Council at £270m and Warrington Borough Council with £220m. Eastleigh Borough Council also spent £194m.
Peebles also highlighted concerns around accounting for LOBO loans, which he said had presented “significant challenges”.
He said that in some instances “there was evidence to suggest that the accounting issues [around LOBOs] were not properly thought through”.
In summer, a group of 14 local authorities announced they would be taking legal action against Barclays bank over LOBO loans, which they deemed to be ‘fraudulent’.
