Council rethinks commercial property investment in light of CIPFA guidance and PWLB rate hike

West Berkshire Council is considering whether to invest the £37.5m remaining in its property budget in further properties after new guidance and increased borrowing costs put a question mark over continuing to use the money in this way.

The council has spent £62.5m on commercial property both in its own area and as far afield as Nottingham and Guisborough, which has brought it an income of some £1.15m this year.

A report to its overview and scrutiny committee said that recent guidance on prudential borrowing from the Chartered Institute of Public Finance and Accountancy (Cipfa) said councils must not borrow more than, or in advance of, their needs purely in the interest of profit.

This guidance meant that West Berkshire’s section 151 officer would be unlikely to accept the council investing the remaining £37.5m in similar properties to those it already owned, the report said.

It said that to continue with the full £100m budget was a ‘do nothing’ option, “but is unlikely to be acceptable as a viable option as it risks non-compliance with latest Cipfa guidance on investment and on that basis is unlikely to receive the support of the 151 officer”.

Continuing to invest £100m but in line with the Cipfa guidance would be “likely to result in the current UK wide investment being restricted to acquisitions within West Berkshire only”.

Increased borrowing costs imposed by the Public Works Loan Board (PWLB) would also cut the profitability of these investments.

The report asked councillors to consider whether the money could be better spent on housing or environmental projects.