A lot of people will read reports of local authorities making profits on the commercial market, unsure what to make of it all. It’s all “Smoke & Mirrors”. Local authorities are increasingly employing the services of investment experts to help them decide what to do.
Political parties don’t have policies or manifesto promises on the subject of whether Local Authorities should seek to maximise their income by using funds, or borrowing, to invest in the commercial property market.
It is, therefore, one of those things which are left to the judgement of the political group that happens to be in charge of any individual council.
Locally, Eastleigh Borough Council seems to be doing well. The Lib Dem administration is reported to be profiting to the tune of £5 million a year, which it uses to run services and reduce council tax. The conservative opposition members oppose the policy calling it “too risky”.
Meanwhile, here, the complete reverse is true. The conservatives on New Forest District Council have only recently announced that they plan to dip their toe in the commercial property market. They have agreed to borrow money at low-interest rates with the idea of making a good return. At the moment, they haven’t secured a single deal.
I don’t favour local authorities going along this route. My concerns are two fold and linked. Firstly, markets rise and fall. At some point, the market will crash. It’s absolutely inevitable. All markets do so.
My second objection is that the model for delivering services to residents is a tried, tested and sustainable one. You decide what the population needs and you deliver it by means of raising the money through taxation. Why undermine a system that has always worked and is sustainable in the longer term?
Delivering vital public services should not depend upon having had a good year in the commercial property sector.
I suppose it is a good thing that local authorities have the power to decide to do different things. Perhaps we should not be surprised that politicians will say different things when they are in power and when they are in opposition.
I just think that all is well whilst the market is strong. People will be quick to condemn when things aren’t going so well. Perhaps Brexit will hasten a property market crash, perhaps it won’t. If I could be sure what happens in the future, I would be in a unique position and able to make a fortune!