In September last year, the Isle of Wight council (IWC) approved a strategy for investing £100,000,000 in commercial property.
It was hoped that the anticipated £5,000,000 per annum return on the investment would go some way to filling the huge budget gaps the IWC face over the coming years due to cuts in funding from the Government.
News of the proposals attracted strong criticism from opposition members of the council, as well as members of the public.
A ‘dead duck?’
However, just a few months later the strategy appears to have been dropped by the council who say it would be too risky.
At the February Cabinet meeting, Cllr Geoff Brodie questioned why the predicted income of £5m per annum had not been included in budget forecasts and asked whether it was now a ‘dead duck’.
Change in guidance from Government
The financial officer, Chris Ward, said he wouldn’t go as far as calling it a ‘dead duck’. He explained that no borrowing or speculation on property had yet taken place and that the purpose of the strategy was safeguard public funds.
However, he told members that two new consultations had been issued by the Government that could potentially have an impact on the council’s original plans.
The first, he said, related to rules on investing outside a local authority’s area, as well as a requirement of more than the single objective of profit-making. The other consultation related to a provision for capital repayments.
Other authorities investing
Portsmouth City Council, whose financial officer (Chris Ward) the IWC shares, has a property portfolio worth £6.6m per annum to the city and they recently invested in property in Leeds.
Bournemouth Council are planning to invest up to £125 million in the commercial property market, whilst North Somerset Council has ploughed nearly £38 million in borrowed cash to buy a major retail complex and Essex County Council have agreed to purchase a retail park.
For now, it looks as though plans to borrow £100m to invest in commercial property off the Island won’t be happening any time soon.