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Ipswich Borough Council ignore worries on commercial property deals.

May 22, 2020 3:03 PM
By Oliver Holmes

Ipswich Borough Council has just announced that it has purchased a business park in Peterborough for £22.5 million. This has been acquired through their property company, Ipswich Borough Assets (IBA), and is financed by a loan from the Public Works Loan Board.

IBC do these deals to obtain a profit which can then be used to replace funds lost by major reductions in funding from the central government. But borrowing money to invest and get a profit would be unlawful for IBC and doing it through a separate property company, such as IBA, has been discouraged since the Ministry of Housing, Communities and Local Government tightened guidelines two years ago. Essex County Council "paused" all their purchases after this change, for example.

In February 2020, the National Audit Office published a report which was very critical of the small number of authorities which still do it - and Ipswich BC is one of the biggest players. IBC use a loophole in the guidelines which allows authorities to justify breaches if they "have regard to" the guidelines. In particular, the NAO were very critical of out of area investments which cannot show any local benefit - exactly what IBA has just done in Peterborough. Parliament is so worried about the position that on 17 April 2020 it launched an enquiry through the Public Accounts Committee.

Opposition councillors in Ipswich play no part in investment decisions and the Labour Executive has refused to allow any scrutiny of IBA as it is a private company. As Councillor Oliver Holmes says: "Liberal Democrat and Conservative councillors were told of this purchase a few hours before it was announced in the press. Legitimate questions should have been asked on the wisdom of buying property in the middle of the Covid Pandemic and in the face of clear warnings from the National Audit Office and the concerns of the Public Accounts Committee. Additionally, there has been a clear change in strategy since last year when we were told investment would be local."

Sources:

https://www.ipswichstar.co.uk/news/ipswich-buys-peterborough-park-1-6661133?fbclid=IwAR1WMlz1GcJvIKcPsBSLFwSiSrsn_MS4C8ZhPyObLGHZYAfQY2J60Fvp9pM

https://www.cipfa.org/

https://www.nao.org.uk/report/local-authority-investment-in-commercial-property/?fbclid=IwAR0Yf5TE5XXzio8gZKkwibCgac4pDjMdBguf5_B4mSHxUJAhRLW0VHEfhLA

https://www.localgov.co.uk/Investing-in-commercial-property-amidst-Covid-19/50418?fbclid=IwAR3bT9R9LlgW5nwvH9nGIwE7IUwXED-bbCA64ucAYbPwYOpD5W3HLJUASBI

https://www.localgov.co.uk/MPs-launch-inquiry-on-local-authority-commercialinvestment/50354?fbclid=IwAR3i-Se-mvHA_cujy4rCFkWocISnbpRgTlRcVY0lpAQVKRzlTJ-SCel-22E

https://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news-parliament-2017/local-authority-commercial-investment-inquiry-launch-19-21/?fbclid=IwAR1L6M_M_riwQ3CJ2velcfdjL0Cuo7_ZTddw35YK2g2Cz3re2_DERwX7t_E

Oliver Holmes