WARRINGTON Borough Council (WBC) is among 49 local authorities that spent £5.28 billion on buying commercial property since 2016.

Some local authorities in England have invested significant public money in purchasing property over the past three years with the aim of generating a financial return.

According to a report by the National Audit Office (NAO) – which scrutinises public spending for Parliament – debt has increased for many of these authorities as a result, with a small group seeing significant increases in the amount they owe and the cost of repayment.

The independent body estimates that authorities spent £6.6 billion on purchasing commercial property from 2016-17 to 2018-19 – 14.4 times more than in the preceding three years.

And 80 per cent of the £6.6 billion spent in the last three years was by only 49 local authorities, 14 per cent, including Warrington.

However, 105 authorities spent at least £10 million buying commercial property in this period, compared to only 13 authorities spending at least this amount in the previous three-year period.

Gareth Davies, the head of the NAO, said: “Local authorities have responded innovatively to the challenge of funding constraints, with some investing in commercial property to secure additional income.

“However, the benefits from this investment must be considered against the potential risks to authorities, particularly given the concentration of this activity and associated borrowing within a relatively small group of authorities.

“MHCLG (the Ministry of Housing, Communities and Local Government) needs to look again at the framework which governs local authority borrowing and investment and consider whether it is still fit for purpose.”

Senior figures at Warrington Town Hall say commercial properties are being bought in an attempt to offset the impact of cuts in Government funding.Warrington Guardian:

Warrington Town Hall

The acquisitions boost income through rent, which can be used to deliver services.

Labour-run WBC’s deals include the £211 million purchase of Birchwood Park and the £26.1 million purchase of Eddie Stobart’s headquarters at Stretton Green Distribution Park.

Chief executive Steven Broomhead says the national local government finance system is ‘in a mess’ and highlighted the impact of austerity.

He added: “Any investment is subject to detailed and rigorous independent due diligence.

“The income we get from all investments is just over £20 million a year. This is to support the continuation of frontline services.

“To raise another £7 million of revenue, you probably have to invest into another £400 million worth of property.

“Around 23 per cent of our core budget next year will be from commercial income because 28 per cent of our budget has been taken away from us by Government.

Warrington Guardian:

Council chief executive Steven Broomhead

“A recent NAO report shows that more and more councils are now investing in commercial property.

“This year over £6.6 billion was invested for a commercial return. 49 councils, including WBC, accounted for 80 per cent of this capital investment.”

In December, deputy leader Cllr Cathy Mitchell highlighted that, from the draft 2018-19 accounts, the council’s long-term borrowing totalled £827 million, with the value of long-term assets held by the authority amounting to £1.273 billion.

Cllr Mitchell and leader Cllr Russ Bowden were pressed on the strategy in place at the leader’s forum in Burtonwood earlier this week, while a resident asked for more transparency over the deals.

Cllr Bowden told those in attendance that cuts would have to be made if the surplus cash from investments was not coming in, but he admitted it is not normal territory for authorities.

“The traditional way of doing stuff is long gone,” he added.

“Of all the portfolio investments, every one of them is currently ahead of the business plan, so they are performing better than we had projected when we made the decision to make those investments.”

Warrington Guardian:

Council leader Cllr Russ Bowden