Councils look to become more reliant on investment income

Two-thirds of councils in England believe they will become more reliant on income from commercial investments in the future to help make ends meet.

The 2020 State of Local Government Finance report by the Local Government Information Unit (LGiU) and the MJ reveals that 66% of respondents think councils will become more reliant on investments to replace money they no longer receive from Westminster.

In recent years, New Start has reported on a large number of such investments, including supermarkets, business parks and office blocks.

Many of these purchases have been funded through the Public Works Loan Board (PWLB), which offers councils long-term loans at favourable rates.

But in October, the Treasury increased the interest rate for new loans.

According to the LGiU survey, more than half of councils (59%) have changed their financial plans for 2020/21 after October’s interest rate rise.

But it also reveals that most (87%) still hope to borrow from the PWLB this year, while almost a quarter (23%) plan to use the Municipal Bonds Agency.

Three quarters of councils said they are currently exploring investing in local commercial developments. A similar figure (71%) said they are looking at local housing, while just under half (47%) are considering investing in energy projects this year.

And three quarters of councils say they ‘lack confidence’ in the government’s plans to let them keep all the money from business rates as a means of funding local authorities.

Just under half of councils (46%) said they would support the introduction of a local income tax and a third (38%) said they would support a local share of the new digital tax.

Similar numbers said they would back a tourist tax (36%) and a local share of corporation tax (31%).

‘The state of local government finances is dire,’ said LGiU chief executive, Jonathan Carr-West.

‘Eight years later and the message continues to be the same, a broken record. It is simply unacceptable that the Government has let things get to this point. Councils deserve better as they work tirelessly, day in and day out, to deliver the best quality services for their residents.

‘This isn’t local government asking for more money. This is about a fundamentally flawed system that has been broken for years and the government continually refusing to acknowledge or engage in a proper solution.

‘Sticking plasters will not solve these critical issues. Our social care system is no longer on the edge, it’s fallen off the cliff,’ added Mr Carr-West.

‘Our children’s services aren’t at breaking point, they’re broken. These are issues cannot wait another year to be solved. That is why we look forward to working with the new government to develop solutions in the weeks and months ahead.’

Photo Credit – Stevepb (Pixabay)