Spelthorne drops commercial activity to focus on housebuilding

15 Feb 19

Spelthorne Borough Council will drop its controversial commercial property investment strategy to focus on housebuilding. 

The council has gained attention over recent years for its investment strategy, which relies on borrowing significant sums from the Public Works Loan Board to invest in commercial property.

Council documents, which will be discussed by cabinet next Wednesday, said the strategy “has played a key part in putting the council on the firm financial footing that it enjoys today”.

The capital strategy document said: “The focus of the council was previously to generate revenue in order to safeguard its basic services. The focus now is on providing affordable housing.”

The council’s most high-profile venture was the purchase of a £360m business park in Sunbury-on-Thames, for which it took out 50 separate PWLB loans.

“Total commercial investments are currently valued at £933m, providing a gross average return of 4.89%,” the council document said.

Spelthorne said that its commercial asset acquisitions will provide a net surplus contribution to the council’s revenue budget in 2019-20 of £9.8m per annum.

Had it not undertaken this investment strategy, the council said, it would have had to cut non-statutory services, such as meals on wheels and additional community transport.

Reductions in maintenance of parks, a frequency of waste collection would have also been necessary, the council said.

CIPFA has previously warned that some local authorities were investing in commercial properties disproportionately to their resources.

The institute said that councils should not borrow in advance of need and has committed to producing further guidance on commercial property investment. It was due to publish the guidance at the end of last year.

In his provisional local government finance settlement in December last year, communities secretary James Brokenshire, said: “I share the concerns of CIPFA and others about the risks that these local authorities are exposing themselves and the taxpayers to.”

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