Savage cuts by the Government in council spending of 37 percent between 2010 and 2015 have forced councils like Surrey Heath and Spelthorne to gamble heavily by entering the property market and purchasing huge amounts of real estate.
Apparently any lesson learned by investing council tax payers’ money in an Icelandic Bank has not been taken to heart. Only in recently was money Surrey Heath placed in a failed Icelandic Bank repaid.
Surrey Heath has spent over £90 million, of which £84 million was spent on the Shopping Mall in the centre of Camberley. The Council purchased The Mall at a time when there has been a fall in consumer spending in the retail trade.
They possess a large retail site which once housed the bankrupt BHS which has sat forlornly empty for many months. If the Borough’s one large departmental store, A & N House of Fraser, were to depart, Surrey Heath would be left with a great vacant hole in the retail site it now owns.
The operation of an authority in this manner hardly seems valid at a time when the Council is proposing to turn its museum into what they refer to as a virtual museum available only on the internet.
The major provider of the area’s local services, Surrey County Council has for many years made pious noises about bringing together services such as adult education and the library but nothing has happened to create something like the discovery centre to be found in Winchester, despite property now being available for such a development.
The loan money for the property purchases has been drawn from the Treasury-run Public Works Loan Board. Former Business Secretary Vince Cable believes that the Councils are creating a financial bubble which could ultimately lead to their bankruptcy. He told The Observer newspaper, “There is a very high risk of bankrupting their local authority,” by taking what he refers to as “unorthodox measures.”
The Observer also quoted an investment manager as saying the councils were involved in a game of monopoly with council tax payers’ money.
Facing what is estimated by 2020 to be a £6 billion gap in money available to councils, Spelthorne Council has just purchased a business park at Sunbury on Thames for £360m after taking out 50 separate loans with the Public Works Loan Board.
When questions about this risk taking were raised by Lord Myers in the House of Lords he was told that the Government did not see its role as monitoring these investment activities by local authorities. The Treasury later said that dangerous speculation of this kind was proof of the working of local democracy.