MPs launch inquiry into local authority commercial property investment

The Public Accounts Committee is to hold an inquiry into councils’ investment in commercial property, following what it described as a “recent step-change in the scale of activity”.

Estimated commercial property purchases for 2013-14 to 2015-16 were £460m; compared to an estimated £6.6bn for 2016-17 to 2018-19.

The move follows the National Audit Office’s ‘Local authority commercial investment’ report, which was published in February this year and assessed whether the Ministry for Housing, Communities and Local Government had effective oversight of the risks to the financial sustainability of local authorities due to their investments in commercial property.

The NAO report found that there had been a significant increase in out-of-area commercial property acquisition. There had also been an increase in acquisitions that were outside the acquiring authority’s LEP [Local Enterprise Partnership] area.

The spending watchdog also found that that changes made by CIPFA and MHCLG to statutory guidance had not stopped some authorities borrowing large sums, to invest in commercial property. Commercial property acquisition was said to be concentrated in a relatively small proportion of authorities.

The NAO noted that local auditors had raised concerns about the governance and risk management arrangements for investment activity in some authorities. The data MHCLG collects had limited usefulness for monitoring commercial activity and assessing its risks, it added.

On 11 May 2020 at 2:30 pm the PAC will question officials from the Ministry of Housing, Communities, and Local Government on gaps in commercial skills in local government, and the extent to which the Department formally monitors commercial activity and long-term exposure to risk.

The committee will also ask officials about the Ministry’s response to COVID-19, and what impact the pandemic has had on local government finances.

Anyone can submit evidence on these issues until May 6.