WARRINGTON Borough Council is being urged to be more open and transparent about their commercial investments.
This request by opposition Liberal Democrats is in line with the findings of a review commissioned by the government on the transparency of local government reporting.
Councillor Ian Marks, the Liberal Democrat Finance Spokesperson said: “At the last Council meeting I asked the Labour administration about their policy on commercial investments. The Treasury Management report clearly states that HM Treasury will no longer allow local authorities to borrow money from the Public Works Loan Board to purchase commercial property if the aim is solely to generate an income stream. When I raised this at the Audit Committee I was told this wasn’t a problem because we could borrow money more cheaply from elsewhere. This may be true but goes against the spirit of Government thinking and must be questioned. I asked if this new ruling had affected any of our investment proposals.
“We accept that the Council must find creative ways to generate income to safeguard basic services. There is still confusion and public concern about the risks being taken and the huge debts being accumulated. We know due diligence is carried out by external experts, but Liberal Democrats believe some investments for pure commercial return are just too risky. This particularly applies if they are geographically well away from Warrington, not related to regeneration or in commercial sectors that are nothing to do with local government.
In the autumn, a Government Review chaired by Sir Tony Redmond made a number of recommendations. One of its remits was to investigate the transparency of local authority financial reporting. It found that statutory accounts prepared by local authorities are ‘considered to be impenetrable to the public’. There was a recommendation to appoint at least one independent suitably qualified person to Councils’ Audit Committees. I am urging the Council to adopt this recommendation to assist with holding it to account.
“COVID has shown the power of local bodies to deal effectively with problems, in contrast to national government that has made such a mess of everything it has touched. If national government-funded councils properly we would not have this ongoing debate about the rights and wrongs of investments.”
In response Deputy leader of the council Cllr Cathy Mitchell said:”Firstly, we have all seen the positive impact of local councils during this crisis, especially ours in Warrington, . Our wonderful council workers have not stopped; clearly local government has been agile and effective where the national government hasn’t. My heart goes out to everyone who has had to change their Christmas plans. Many will, no doubt, be very distressed about the announcements over the weekend.
“Councillor Marks is right to point out that if the government-funded councils properly then we wouldn’t have to do any investments at all. In fact, council budgets have dropped by 60p in the £1 since 2010. This means a stark choice, either to cut vital services or to raise income. We spend 80p in the £1 on caring for children at risk and on people who need care, so you can see that we would be doing less and less for people who need the most help. We were not prepared to do that.
Cllr Cathy Mitchell
“The vast majority of money invested has been spent on bricks and mortar. These properties are rented out to good companies on long leases and give us a net income (revenue) of £20m every year. Our investment property value is higher than the total debt. The council’s debt is not all linked to these investments – there is historic debt linked to regeneration projects, for example. We could sell all of our investment property and pay off all the debt. But in doing that we would lose the income our investments provide. Councils are not generally allowed to use money from the sale of assets (capital) to pay for day to day services. The value of our investment property has risen significantly during the COVID crisis.
“We take the responsibility of managing investments very seriously. We take expert external advice on the relative risks of each investment we consider. For larger investments, we hold risk workshops, attended by councillors from across the political divide, a range of external experts and our own highly experienced officers. We always urge members from the other parties to join in: they don’t always attend, sadly. We have cross-party committees which scrutinise all investments before any decision is made. Transparency is very important to us. We have recently commissioned an external audit on governance within our council, to look at how we can do things better, and we are actively implementing the recommendations of that review.
“Not only do our investments bring in income for the council, but they also fall fully within the revised government guidance and are very much done in support of the council’s policies. We do have property investments within our economic area, we share a business rates pool with St Helens (Movianto) and Halton (Tesco’s distribution) which helps all three boroughs to keep more of our business rates, our investment into the HUT group is helping grow a “local” business and will create jobs in the region. Our housing investments have created jobs and important social housing across our Cheshire and Warrington LEP region. Our energy and solar investments are important parts of our policy in helping to reduce fuel poverty and addressing climate change. All of these initiatives have an additional benefit that they create a financial return for the council too, which is certainly helping to support our budget given the continued austerity and the failure by this government to properly fund councils for “whatever is needed” in dealing with the pandemic.
“The changes to the PWLB will require the council’s S151 finance officer to confirm that the rules for using the PWLB continue to be followed, and of course our finance team will continue to explore other ways of funding our Capital Programme if it is more financially beneficial to do so.
“We will be giving a full update on property investments at our February Cabinet meeting, and of course we will update our Capital, Investment and Property Strategies as part of the budget process in February, which all councillors will vote upon.”
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3 Comments
That was a long-winded response from Cllr Mitchell which sadly didn’t address any of the issues.
I remain deeply concerned about the level of risk which WBC have taken on. There is no evidence – none whatsoever – that the council’s investments are generating a net return. The lack of transparency is deeply worrying.
I’m sorry to say that only a change of council will give taxpayers the basic information we should already have received about the structure and performance of these investments.
I don’t share Cllr Marks’ satisfaction at the level of “due diligence…….carried external experts.” For example what expert would put their name and reputation to the Redwood investment. First we were told it was with Redwood Bank, eventually we later learnt it was with Redwood Financial Services. And the disparity between WBC’s price per share compared with the share price others paid is as unbelievable as the reason given for that difference. We have repeatedly been told by the Council Leader that his invest to save strategy is to bring much needed money into WBC’s coffers to offset that cut from the council’s funding by the government; but WBC’s investment quorum gave Redwood Bank a five year ‘holiday’ during which it did not expect to see any returns on their £30 million investment.
Apologies, I should have proof read my earlier comment before sending. My first sentence should have read:
I don’t share Cllr Marks’ satisfaction at the level of “due diligence…….carried out by external experts.”