Good governance of commercial activities

With pressures from COVID-19, changes to official investment guidance and some recent negative media reports regarding council commercial activity, there is a risk that local authorities may reduce innovation and commercial approaches.

The financial stability of councils must always be a priority. Prudent commercial investments can support financial stability, ensuring sustainable income generation that can help to keep running valuable services for our communities. 

When refocusing commercial activity, the key to prudent investment is robust governance.

At Eastleigh Borough Council, we have worked hard to create a culture that supports our commercial ambitions. 

The council is not a commercial entity, nor does it aspire to be. At the heart of our commercial activity is profit with a purpose. One result is net commercial and investment income that exceeds income from council tax and business rates.

I was delighted to share Eastleigh Borough Council’s commercial approach with attendees at a recent LGA masterclass for councillors on commercial leadership and decision-making. As leader, I have encouraged creative thinking to tackle challenges, backed by clear and robust governance. 

Councils have the legal powers to create new income generation opportunities, which Eastleigh has embraced. Our commercial activity includes a market-leading garden waste service, which contributes £340,000 annually to the council.  

The council is pursuing an ambitious regeneration strategy, including intelligence-led asset acquisition, and working with developers and as a developer to provide new housing across a range of locations and tenures. 

This enables the council to ensure the quality and volume of housing is in keeping with council priorities and the needs of residents.

To help to achieve this, Eastleigh recruited an experienced commercial manager and created a governance framework that clearly outlines expectations around risk, asset categories and powers of decision-making. 

This framework is designed to support innovative approaches, ensuring risk is appropriate to the council’s risk appetite and tolerance and that risk is controlled. Eastleigh’s governance empowers decision-makers while holding to account investment decisions and investment performance. 

All investments require a sound business case that reflects the council’s commercial and social values. The business case is subject to approval by an investment board as well as political approval and scrutiny.

For commercial activity to be successful, it is important to create the conditions for success. Eastleigh Borough Council is working hard to ensure both councillors and officers work together with a single purpose and that they feel empowered to suggest new ideas and to take appropriate risks. 

As leader, I encourage innovative approaches from Eastleigh’s leadership team, with the opportunity to learn and grow built into the council’s commercial strategy.

The LGA is running free online commercial masterclasses for councillors, throughout February and March. The masterclasses include a case study from an LGA member peer. For dates, course outlines and to book your place, please visit www.local.gov.uk/our-support/efficiency-and-income-generation/commercialisation/free-commercial-skills-councillors

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