Local authorities have invested in commercial property for a long
time, but there has been a recent step-change in the scale of
activity. Estimated commercial property purchases for 2013-14 to
2015-16 were £460m; compared to an estimated £6.6bn for 2016-17 to
2018-19.
Local authorities have invested in commercial property for
a long time, but there has been a recent step-change in the
scale of activity. Estimated commercial property purchases
for 2013-14 to 2015-16 were £460m; compared to an estimated
£6.6bn for 2016-17 to 2018-19.
The NAO’s February 2020 report on ‘Local authority
commercial investment’ assesses whether MHCLG has
effective oversight of the risks to the financial
sustainability of local authorities due to their
investments in commercial property.
The report finds that there has been a significant increase
in out-of-area commercial property acquisition. There has
also been an increase in acquisitions that are outside the
acquiring authority’s LEP area. The report also finds that
changes made by CIPFA and MHCLG to statutory guidance have
not stopped some authorities borrowing large sums, to
invest in commercial property. Commercial property
acquisition is concentrated in a relatively small
proportion of authorities. The NAO conclude that local
auditors have raised concerns about the governance and risk
management arrangements for investment activity in some
authorities. The data MHCLG collects has limited usefulness
for monitoring commercial activity and assessing its
risks.
On 11 May 2020 at 2:30pm the Committee will question
officials from the Ministry of Housing, Communities, and
Local Government on gaps in commercial skills in local
government, and the extent to which the Department formally
monitors commercial activity and long-term exposure to
risk.
The Committee will also ask officials about the Ministry’s
response to COVID-19, and what impact the pandemic has had
on local government finances. You will be able to watch the
session in full live and in archive at www.parliamentlive.tv
