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Published on: 13/11/2020 06:05 AMReported by: roving-eye
Concerns are growing about Sefton Council's retail centre purchasing strategy following the announcement that another Labour council which had done much the same thing has officially 'gone bust'. Croydon Council in London pioneered the strategy of investing in commercial property to try to help make ends meet three years ago, The Council has just issued a 'section 114' Notice which effectively declares the local authority bankrupt. The Section 114 notice bans all new expenditure at the Council, with the exception of statutory services for protecting vulnerable people.
Previous Labour Council Leader Tony Newman has been accused of leading Croydon council into a financial crisis with investment decisions which, as with the purchase of Bootle Strand shopping centre by Sefton Council, was done behind closed doors with no opposition councillors being allowed to give the proposal any detailed scrutiny.
Croydon Council established what it called an 'asset acquisition fund' of £100 million to invest in property - and increased this fund to £200 million in December 2019. 'The Colonnades' Retail Park was the Council's first purchase after its asset acquisition fund was set up in November 2018 for £53 million. The Council hoped that this purchase might provide an annual income of £1.4 million. And in December 2019, Croydon Council bought two more properties: builders’ merchants Selco and medical supplies specialist Alliance Healthcare.- at a combined cost of £14 million.
A damning report into the financial state of the council, published by accountants/auditors Grant Thornton has deemed the investments "inherently flawed". The report said: "The investments in The Colonnades and Croydon Park Hotel were not grounded in a sufficient understanding of the retail and leisure market and have again illustrated that the council’s strategy to invest its way out of financial challenge rather than pay attention to controlling expenditure on core services was inherently flawed."
The new Council Leader, councillor Hamida Ali, has said that Croydon council has to address the recommendations made by the auditor as swiftly as it can, and learn from its mistakes. She said: “We must come together as a whole council, to address the serious criticisms contained within the auditors’ report and agree a way forward to ensure that this can never happen again."
In Sefton, the annual official valuation of Bootle Strand shopping centre, purchased by the Council for roughly £32 million was reported to the Council as having lost one third of its value over the past 12 months in response to a formal question from Southport Councillor Tony Dawson. Sefton Council shows no signs at present of 'going bust' although it is suffering seriously financially, partly as a result of poor funding by Central Government of the council's efforts to deal with COVID-19.
Councils in the south of England whose residents populate the Metropolis' prosperous ex-urbs are among many to invest in commercial properties.
Properties bought by councils include a BP business park in Sunbury purchased by Spelthorne for £392 million; a Tesco Extra bought for £38.8 million by East Hampshire District Council; branches of Waitrose and Travelodge acquired by Runnymede District Council for £21.7 million and a B&Q store that is now owned by Dover District Council. Other acquisitions range from farmland and gyms to a Royal Mail depot and a solar farm.
If Sefton's commercial property punt becomes a net loser, it does at least have the virtue of being at the centre of Bootles' retail /commercial offering unlike many of the Councils' investments.
Current circumstances threaten to put our central government in hock for decades, in all likelihood. It is only central government's virtually unlimited power to tax that prevents the whole country bankrupting itself.
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