Some councils have exposed themselves to commercial investments that risk cuts in local services and a big bill for local taxpayers, according to the Commons’ Public Accounts Committee.
It found local authorities spent an estimated £6.6 billion acquiring commercial property in three years – 14 times more than in the previous three-year period – with a further £1 billion in the first half of 2019/20.
Up to 91 per cent of this commercial property spending was financed by borrowing.
The report recognises that much commercial investment was in response to financial pressure on local authorities’ budgets and was encouraged by the Government. It calls on the Ministry of Housing, Communities and Local Government to carry out more oversight of council borrowing and investments.
Cllr Richard Watts, Chair of the LGA’s Resources Board, said: “Councils have faced a choice of either accepting funding reductions and cutting services or making investments to try to protect them.
“As the committee rightly highlights, this was an approach that was encouraged by government. Investments are not only made to try to plug funding shortfalls but also to help contribute to local economies.
“Councils continue to face significant extra cost pressures and huge income losses as a result of the pandemic. The Government’s commitment to fund a portion of lost income from fees and charges is a step in the right direction but does not cover full losses, nor does it extend to commercial income losses.
“We reiterate our call to government to meet all extra cost pressures and income losses from fees and charges and other sources, including commercial activity.”