Thread by @johnelworthy

The 2019/2024 business plan @cambscc offers the reasoning behind decision to “create a commercial investment portfolio to maximise the available return to support the delivery of a balanced budget”.

Of two examples quoted one is @spelthorneBC

“Cambridge and Peterborough City Councils, and Huntingdonshire DC, have been undertaking such acquisitions for some time.

“Examples from other local councils include: Spelthorne BC - £200m+ commercial portfolio developed over nine years - £360m investment in BP office park

Spelthorne may not turn out to have been the best example for councillors in Cambridgeshire to look for financial astuteness.

This from @TBIJ (The Bureau of Investigative Journalists) a week or so ago@

“A council has been accused of likely breaking the law and could be taken to court by its own auditors after borrowing £1bn in public money to invest in commercial property, according to explosive letters seen by the Bureau.

In the letters KPMG, one of the “Big Four” accounting firms, sets out why it has spent two years refusing to sign off the accounts of Spelthorne borough council, a tiny local authority in Surrey that spent £1bn of public money on office blocks.

The auditor says its legal advice found it was likely that the purchase of three office buildings for £239m in 2017-18 was unlawful because Spelthorne ignored rules that forbid councils borrowing purely to make a profit on subsequent investments.

KPMG warns it could take the unprecedented step of going to court to seek a ruling that the council has broken the law.

If the court agreed, it would not only call into question the entirety of Spelthorne’s £1bn investment portfolio but potentially have implications for other councils that have also borrowed heavily to fund property purchases, as well as other money-spinning investments.

Spelthorne’s spending, funded entirely by borrowing from the public purse, is the most high-profile example of cash-strapped local authorities buying property in the hope that rental income can replace money lost to government cuts.

In 2018-19 councils across England and Wales spent £6.6bn on acquiring offices and shopping centres – more than ten times the amount spent in the previous three years.

However, the coronavirus crash and subsequent wide-scale plans to permanently switch from office to home working means much of that investment could be at risk, as the value of commercial property slumps.

Earlier this year an inquiry by the Public Accounts Committee into local authority property investments, prompted in part by a series of Bureau investigations, accused the government of being asleep at the wheel while councils ignored the rules and borrowed disproportionately

This was to fund spending sprees. The Treasury said it would ban councils from making such investments, but has yet to follow through on the threat.

It is unclear exactly what would happen if a judge were to rule against Spelthorne because an auditor has never taken such a “nuclear option” before. However, a senior figure within the council said they were “extremely concerned” that it could bankrupt the authority.