Council’s £100m mainland property investment plans quietly dropped by Conservatives

The much-lauded investment strategy, which was expected to bring in £5m pa to help fill the enormous budget gap due to cuts in Government funding, is quietly dropped by the Conservatives.

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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.

Image: James Petts under CC BY 2.0

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Tuesday, 13th March, 2018 6:13pm

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Filed under: Budget Cuts, Government, Island-wide, Isle of Wight Council, Isle of Wight News, Top story

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7 Comments on "Council’s £100m mainland property investment plans quietly dropped by Conservatives"

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YJC

I can honestly say I’m relieved to hear this news.

I do not believe it

God is merciful!
I wouldn’t trust the mob in County Hall to run a Christmas Club.

Cybermatt

Good. Way too risky and fuels property price inflation – which is already one of our biggest problems.

confidential

Financial Officer Chris Ward has presumably realised that if the IW Council do not have the expertise to manage a £4M Floating Bridge contract they are unlikely to succeed with a £100M portfolio.

Colin
Quote from the government paper mentioned in the article — “However, the prime duty of a local authority is to provide services to local residents, not to take on disproportionate levels of financial risk by undertaking speculative investments, especially where that is funded by additional borrowing.” Further on the paper states — “We want to ensure that local authorities make prudent provision for the repayment of debt.”… Read more »
boatman

If the Council was to borrow money for investment purposes then it should invest in the communities it is elected to serve thus encouraging other investors and generating the income necessary to to support vital services – the idea of investing outside the Authority area seems to me to be incredibly inappropriate.

electrickery
Would this have anything to do with the recent Tory government hint that councils should not be building up huge reserves? In other words, be prepared, chaps, to start eking out your increasingly parsimonius “Support Grant” by spending capital. Of course, we in the real world know that you can only spend capital once – when it’s gone, it’s gone. Then what do we do? Ah, well… Read more »