Harry Fone: Greater transparency should be required on councils making commercial investments

23 Sep

Harry Fone is the Grassroots Campaign Manager for the TaxPayers’ Alliance.

It’s bad enough that taxpayers have been stung by a hike in National Insurance but now they face the double whammy of another big increase in Council Tax to fund social care. According to the Telegraph, ministers are of the opinion that a six per cent increase will be needed to meet the shortfall.

Last year the average Council Tax rise across all English local authorities was 4.4 per cent with an average bill of £1,898 (Band D). It’s not unreasonable to assume therefore that an increase could be in the region of five per cent for 2022-23. Were this to happen then a typical council tax bill would be just shy of £2,000. Meaning that since 2001-02 council tax would have increased by a jaw-dropping 121 per cent in cash terms.

This leads to the question of what are councils doing to try and keep bills as low as possible for millions of struggling households? Many authorities are turning to commercial property investments in an effort to generate extra income. But as the research team at the TaxPayers’ Alliance discovered, the performance of these assets is far from clear.

In 2020-21 local authorities across Great Britain and Northern Ireland had commercial properties worth over £6 billion. Despite its small size, Spelthorne still rules the roost as the council with the biggest portfolio at £959 million. East Staffordshire had the lowest yield across its commercial property portfolio, worth £9.3 million at 3.84 per cent. Conversely, Amber Valley had the highest yield at almost 147 per cent. But with many council properties, the yield was either non-existent or not known.

Around one-fifth of councils didn’t provide information to our requests on the grounds of commercial sensitivity. One of which was Nottingham City Council which perhaps isn’t surprising given its recent woeful performance. Another troubled council, Slough also didn’t supply data, stating:

“The council have not undertaken a systematic programme of market and rental valuations for our commercial property for 2020/21 that would provide real forecast/actual yield.”

It’s worrying that they haven’t done this but getting a grip on financial affairs hasn’t been their strong point of late.

Given these huge portfolios, are we seeing Council Tax bills decrease or at least stabilise? It might be too early to tell but early indications are no they aren’t. For example, Woking council has £400 million of commercial property but its Band D council tax is £2,085, the 34th highest in England. So too Spelthorne at £2,040 and Nottingham has the highest council tax of them all.

Now despite my many criticisms I’m not necessarily opposed to council commercial property investments. I understand that many authorities want to make up for lost central government funding. Although it should be noted that they were still increasing council tax long before the cuts ever came. Commercial investments can work to help boost income, Ferris Cowper and Gerald Vernon-Jackson of East Hampshire and Portsmouth respectively, are proof it is possible. But not every council has a former Mars executive and a well-thought-through strategy.

As with so much in local government, transparency is key. Local residents need to know what their council is up to and how well portfolios are performing. Investors in a private company would be entitled to see how their money is being spent so why should it be any different with councils? If trends continue it won’t be long before we see the first Band D council tax bill in excess of £3,000 – especially if investments go south and authorities fail to get a grip on wasteful spending. That’s why more oversight and controls are needed to ensure this doesn’t become a ticking time bomb.