Guidance issued today by the CIPFA outlines what is expected of local authorities that are pursuing investments in property.
In recent years, local authorities have increasingly looked to commercial property investments, including hotels, farms and retail properties, to supplement the revenue they are able to generate.
However, today’s guidance makes clear that authorities must not borrow more than or in advance of their needs purely in the interest of profit. The guidance reflects circumstances where there is no specific or projected need to borrow, but an opportunity has been identified to make profit greater than the authority’s cost of borrowing.
Don Peebles, Head of Policy and Technical, CIPFA, said:
“In a landscape still reeling from a decade of austerity, we would not expect commercial investments in property to be abandoned in full. However, we must ensure that responsible decisions are made with transparency and financial sustainability in mind.
“In the end, the most important consideration is how taxpayers will be affected by decisions made at the top, and they should not be left in the dark about the process.”
While local authority borrowing is covered under CIPFA’s Prudential Code, the increasing role of property investment in councils’ financial plans has driven the production of this new guidance addressing the specific issue.
The Prudential Property Investment guidance is available here.
Today’s guidance builds on CIPFA’s Prudential Code.
For further information please contact the CIPFA press office on T: 020 7543 5737 or E: ashleigh.moore@cipfa.org